Bloxham v. Florida Central & Peninsular Railroad (35 Fla. 625, 1895)

Liddon, J.:

A three-fold object was sought to be accomplished by the bill of complaint; (1) to have it decreed that the exemption from taxation under the 18th section of the Internal Improvement act was a continuing exemption for thirty-five years after the completion of the several lines of railroad constructed on the routes in said act designated, and that said exemption attached to the rm, following the property into whosoever hands the same might come; (2) to have a decree for the recovery by the complainant, as successor of the Florida Railway & Navigation Company, of $140,812.47 paid by said company in 1885, for taxes of 1882, 1883 and 1884, to the State of Florida, alleged to be illegal, and to-have been paid under duress and upon protest; (3) to enjoin the collection of taxes by the defendants for the years 1879, 1880 and 1881, which were sought to be collected under the provisions of the statutes, Chapters 3558 and 4073 laws of Florida. The first two objects of relief were refused by the court below, but the third was granted. Both parties allege in their briefs that the complainant and the defendants each appealed from the final decree below. The record shows an appeal by the defendants only. Both sides have presented the whole case upon the principle that an appeal in chancery is practically a rehearing, and opens up the whole case to the respondents. Southern Life Insurance Company vs. Cole, 4 Fla. 359. We consider the whole case, and whether the complainant below was entitled to any of the different matters of relief for which it prayed in its bill of complainant.

The question involved in the first relief prayed for is easily disposed of. The claim that the exemption provided for in the 18th section of the Internal Improvement act, Chapter 610 laws of Florida (acts of 1855-6, page 16, McClellan’s Digest, sec. 21, page 596), is a continuing exemption, that- it is an incident of property attached to the rem, -and following it into whosoever hands the same may come, can not be maintained in this State. Neither the complainant in this case nor its immediate predecessor is the original builder of the railroads which are sought to be exempted, and both are corporations organized since 1868. That the right of exemption which under the Internal Improvement act of 1855 vested in the original owners and builders of the roads exempted, was a personal privilege and did not pass with the assignment of the property, is by the decision of the Supreme Court of the United States, in the case of Louisville & Nashville R. R. Co. vs. Palmes, 109 U. S. 244, a proposition beyond the reach of cavil or controversy. It is no more open to discussion in. this State. The complainant is a corporation which has come into existence since the adoption of the Constitution of 1868 and the amendments thereto in 1875. Section 24 of Article XVI of the Constitution of 1868, as amended by Article XI of the amendments of 1875, as shown by Chapter 2041 laws of Florida, reads as follows: “The property of all corporations, whether heretofore or hereafter incorporated, shall be subject to -taxation, unless such property be held and used exclusively for religious, educational or charitable purposes.” No corporation could be created since the adoption of this Constitution, capable of accepting and enjoying the exemption from taxation, which was claimed by the complainant. Louisville & Nashville R. R. Co. vs. Palmes, supra.

It is alleged in the bill of complaint, and admitted by. the answer, that certain lines of railroad of the -complainant built in the years 1877, 1881 and 1883 were built upon the lines designated by the Internal Improvement act, in accordance with the provisions of the same, and had been duly accepted by the Trustees of the Internal Improvement Fund as completed; and that they were acquired by the complainant by purchase from corporations composed wholly or in part by consolidation of the building corporations. It can not be justly claimed that there was a vested right to exemption from taxation of these roads under the eighteenth section of the Internal Improvement act. They were all property built or acquired by corporations coming into existence after the adoption of the Constitution of 1868, and whether in the hands of the original building corporations or their assignees and successors, were clearly liable to taxation under that Constitution. The relevant portion of the Constitution of 1868, as amended in 1875, has already been quoted. As it originally stood, section 24 of Article-XVI of the Constitution of 1868 read as follows: “The property of all corporations, whether heretofore or hereafter incorporated, shall be subject to taxation, unless such corporation be for religious, educational or charitable purposes.” The only change made by the amendment of 1875 was that instead of excepting from taxation the general property of religious, educational or charitable corporations, the property excepted was required “to be held and used exclusively for religious, educational or charitable purposes.” Under the section of the Constitution under discussion, as it originally stood, or as it stood after the-amendment of 1875, the railroad and other property of corporations is brought into existence and acquired while the above quoted constitutional provisions were-in force, were subject to taxation in like manner as. other property. Whatever might be said of vested. rights of exemption from taxation of railroads built under the Internal Improvement act before the adoption of the Constitution of 1888, while remaining the-property of the corporations which built them, there can be no force in an argument which claims that notwithstanding the constitutional provisions quoted, the-eighteenth, or exemption, section of the Internal Improvement act conferred a vested right to exemption from taxation of railroads built by corporations created after the Constitution of 1868 became the paramount law of the State. It can not be said that it impairs a vested right to enforce the provisions of the Constitution as to things done and to property created and acquired after they are in full force and effect, and after the exemption provisions of the eighteenth section of the Internal Improvement act were thus repealed by a later Constitution.

The second matter of relief sought by the bill of complaint was to recover from defendants the sum of $140,812.47, alleged to have been paid by the Florida Railway & Navigation Company on the 28th of May, 1885, to William D. Barnes, Comptroller of the State of Florida. This money, as shown by the bill, was claimed by the State of Florida for taxes assessed against said Florida Railway & Navigation Company for the years 1881, 1882, 1883 and 1884. These taxes are alleged to have been paid under duress, because the State’s officers, including the executive of the State, had threatened to sell the railroad of said company on account of said taxes, and to put the purchaser at such sale into possession. The taxes collected are alleged to be illegal on account of the exemption, of the property from taxation. The money sought to be recovered was paid to the Comptroller officially,, and for the State for which he was acting. The recov-

ery is not sought from the defendants individually, but from the State. We can not enter into the merits of this portion of the controversy. The defendants in their answer denied the jurisdiction and power of the Circuit Court to grant this part of the relief prayed for in the bill of complaint. The court below denied the relief upon the ground that the money sought to be recovered had been “lawfully exacted and collected” by the State. The correct order would have been to have dismissed this branch of the case for want of jurisdiction to hear and determine it. The suit for this purpose, while against the two officers of the State named as defendants, -was to all intents and purposes a suit against the State of Florida; a judgment or decree against them would be a judgment and decree against the State. A State can not be sued without its «consent. If it were admitted that the defendants who were sued as officers of the State could bind the State by consent to the suit, the State did not so consent in this case. On the contrary, they especially reserved “ all advantage of exception * * to the jurisdiction and power” of the court “to grant the relief” in question. The nonliability of a sovereign State to be sued, is a principle old, well-established and universally prevalent. Cornwall vs. Commonwealth, 32 Va. 644, S. C. 3 Am. St. Rep. 121, Carr vs. State, 121 Ind. 264, S. C. 22 Am. St. Rep. 624; McWhorter vs. Pensacola & A. R. R. Co., 24 Fla. 417, 5 South. Rep. 129; Hans vs. Louisiana, 134 U. S. 1. By saying that the State can not be sued, it is not meant that no judicial action whatever can be taken against the State, but confining ourselves to the facts of this particular case, that a suit like that before us, whether in the form of a bill in equity or in the nature of an action of assumpsit, or for the recovery of money, does not lie against the

-sovereign State. Opinion of Iredell, Justice, in Chisholm vs. Georgia, 2 Dall. 419. In speaking upon this subject the Supreme Court of the United States, in the conclusion of ,xts opinion in the case of Hans vs. Louisiana, supra, say: “To avoid misapprehension, it might be proper to add that although the obligations of a State rest for their perforrhance upon its honor and good faith, and can not be made the subjects of judicial cognizance, unless the State consents to be sued or comes itself into court, yet where property or rights are enjoyed under a contract or grant made by a State, they can not be wantonly invaded. While the State can not be compelled by suit to perform its contracts, any attempt upon its part to violate pi-operty or rights acquired under its contract, may be judicially resisted,” etc. It is only upon the principles announced in the two last sentences of the quotation above, that the court below had jurisdiction to determine the matters involved in the other object of relief sought by the complainant beside that now under immediate consideration.

The Constitution of Florida- of 1885, section 22 of Article III, is as follows: “Provision may be made by general law for bringing suits against the State as to all liabilities now existing or hereafter originating. The nineteenth section of Article IY of the Constitution of 1868 was the same. No such provision having-been made by the Legislature, the section quoted is inoperative to change the general principles xxpon which we hold that the State is not liable to be sued.

The next and third object sought to be accomplished by the bill of complaint was decided in' favor of the complainant below. This was the relief prayed for and granted, adjoining the collection of taxes for the years 1879, 1880 and 1881, upon certain railroads and appurtenant property of the complainant. These taxes were assessed and levied under the act of 1885, Chapter 3558 laws of Florida, page 4. Said act reads as follows: “That in all cases in which any railroad or the properties thereto belonging or appertaining in this State, in the tax years commencing March 1st, 1879, 1880 and 1881, or any of such years, were not. assessed for taxes for such years, it shall be the duty of the Comptroller to cause the same, or so much thereof as were not assessed, to be assessed for State and county taxes, and twenty per centum of the taxes so assessed for said years, and now unpaid, shall be collected at the same time the taxes for the - year 1885-shall be assessed and collected-; and each year thereafter an additional twenty per centum of said taxes-shall be collected, at the same time and in the same-manner as the taxes for such year are collected, until the whole amount of said unpaid taxes for the years 1879, 1880 and 1881 are paid. The taxes to be assesed under this act shall be the same in amount as they would have been had they been assessed in such years or any of them as to which there was a failure to-assess. ’ ’ The warrant issued and the levy was made and. proceedings to enforce the collection of the taxes by sale of the railroads assessed were taken under the act,. Chapter 4073, laws of Florida. Appendix to Revised Statutes of Florida, page 1010. This act reads as follows: “That the State and county taxes assessed by the-Comptroller of the State of Florida upon any railroads, and the properties thereof in said State for the years-1879,1880 and 1881, under and in pursuance of ‘An act. to provide for the assessment and collection of taxes, on railroads, and the properties thereof, for the years 1879, 1880 and 1881, as to which there was no assessment,’ but which have not been collected, shall be collectecl, and the payment thereof enforced at the same times and in the same manner as is now or may hereafter be provided by law for the collection and the enforcement of the payment of taxes assessed upon the railroads and the properties thereof in the State of Florida. Section 2. That this act shall take effect immediately after its passage.”

Various objections were made in the bill of complaint to the proceedings to enforce the collection of the taxes claimed by the State. Among other things which are insisted upon, and which it is necessary for us to determine, it was alleged, substantially, (1) that Chapter 3558, above set out in full, was obnoxious to-the provisions of the Constitution of the United States, forbidding States to pass laws impairing the obligations of contracts, and to similar provisions in the Constitution of the State of Florida; (2) that it is a special law for the collection of taxes for State and county purposes, and obnoxious to the provisions of the Constitution of the State of Florida, that it does not provide for a uniform assessment of all omitted property, and is discriminating in the mode of payment; (3) that the act was incomplete in itself, is retrospective, and interfered with vested rights; (4) and it-is also claimed, in effect, that at the time the predecessors of the claimant, and through whom it claims, acquired the property assessed, the years 1879, 1880- and 1881 had expired, that the taxes now sought to be collected had not been assessed against it, that the-State had no lien upon it for the said taxes, and that-the right of complainant to the property is superior to. the claim of the State for the taxes sought now to be-collected by a sale of the property. (5) It is also-alleged in the bill of complaint that the exemption of railroads from taxation under the eighteenth section of the Internal Improvement act enured to the complainant because at the time of the purchase of the road by its predecessors through whom it claims title, such exemption from taxation was the law pf the property as declared by the Supreme Court of the State of Florida.

The greater portion of the argument of counsel for appellee, upon the alleged conflict between the act of 1885, Chapter 3558 laws of Florida, and the Constitution of the United States and of the State of Florida, is based upon the assumption that the exemption provided for by the 18th section of the Internal Improvement act attached to the railroad property as an incident of the same, and was a contract by the State for a continuing exemption of the property in the hands of whosoever might acquire the same. As already stated, since the decision of the case of Louisville & Nashville R. R. Co. vs. Palmes, in the Supreme Court of the United States, the proposition contended for has been so finally settled that it is no longer open to discussion in this State.

It is also contended by appellee that the act, Chapter 3558, supra, interferes with the vested rights claimed of exemption from taxation of the complainant’ s property, because those rights accrued, under a judicial construction declaring that the exemption from taxation provided for in the 18th section of the Internal Improvement act, attached to the property as an incident without regard tó changes in the ownership of the same. This contention is supported by reference to the opinions of this court in the cases of Allen vs. Atlantic & Gulf R. R. Co., 15 Fla. 637, delivered at the June Term, 1876, and Genzales vs. Sullivan, 16 Fla. 791, delivered at the June Term, 1878. The first mentioned case did not, but the latter mase undoubtedly did construe the act in question as claimed by appellee. Such construction continued to stand until overruled by the case of Palmes vs. Louisville & Nashville R. R. Co., 19 Fla. 231, decided at the June Term, 1882, and affirmed by the Supreme Court of the United States in Louisville & Nashville R. R. Co. vs. Palmes, 109 U. S. 244, decided in November, 1883.

In effect, the complainant says that while it may be-that the railroad property 'sought to be sold for the-taxes for the years 1879, 1880 and 1881, was really subject to taxation in those years, yet it had been by a mistaken construction of the law declared not liable to taxation, and that the complainant, relyiug upon such construction, and upon faith of the exemption from taxation, had contracted and-invested its money in the property. In this case it is unnecessary to determine what effect a change of judicial decision will have-upon contracts made, while a former and different construction of the law prevailed. In reading the cases, of Palmes vs. Louisville & Nashville R. R. Co., and Louisville & Nashville R. R. Co. vs. Palmes, supra, it is evident that only one phase of the liability to taxation of the property in dispute was before the court and involved in its adjudication. The only point, of non liability decided in Gonzales vs. Sullivan was, that the exemption provided for in the Internal Improvement act attached to the property and continued as an incident of it after its transfer from the original owners and builders. The more important and vital question, as to whether a corporation coming into existence since the adoption of our Constitution of 1868: could hold such property as exempt, was not determined in the Gonzales-Sullivan case; nor has it ever been determined in any other case by this court. Therefore, that one branch of the question had been. determined in favor of the complainant’s contention can not avail it in this controversy. Of what value was it to complainant that the exemption from taxation under the statute passed with the property, if it and its predecessors were such corporations as were prohibited by the Constitution from holding the property as exempt ? The same contention here presented was also made in the case of Louisville & Nashville R. R. Co. vs. Palmes, (sec. 109 U. S. 244, text page 255 et seq.) In that case it was urged that the Louisville & Nashville Railroad Company had acquired its title after the decision of this court in Gonzales vs. Sullivan,- and may be presumed to have acted upon the faith of such decision. The court, however, held the property liable to taxation, and one of the principal reasons alleged therefor was that the effect of the provisions of the Constitution of 1868 upon the capacity of a corporation created after its adoption to accept the privilege and benefit of the exemption was not raised or adjudged in Gonzales vs. Sullivan. The complaint and its predecessors through several antecedent transfers were corporations organized since 1868, and could not avail themselves of any exemption from taxation. Louisville & Nashville R. R. Co. vs. Palmes, supra; Keokuk & W. R. Co. vs. County Court of Scotland County, 41 Fed. Rep. 305.

Another matter is worthy of attention in considering the effect of the judicial construction of the statute from which the complainant claimed his privilege of -exemption from taxation accrued. By reference to the bill of complaint and to the act (Chapter 1646 laws of Florida, pamphlet laws of 1868, page 143; McClellan’s Digest, 1006) it will be seen (in the preamble to the act found in the original, not in McClellan’s Digest) that at the time of the passage of the act, July 29th, 1868, William E. Jackson and his associates were the owner of that portion of complainant’s line of railroad which extends from Jacksonville to Lake City. They had purchased the same at a sale made by the Trustees of the Internal Improvement Fund, as the property of the Florida, Atlantic & Gulf Central Railroad Company, and by the act ref erred to Jackson and his associates were vested with the powers and franchises granted said last named corporation, and were incorporated under the name of the Florida Central Railroad Company. Said Jackson and associates accepted such act of incorporation, and in such corporate name owned and operated such line of railroad. The sixth section of said act of incorporation reads as follows: “That nothing in this act shall be so construed, nor shall it be so operative, as to divest the State of the right to make the said Florida Central Railroad, and all its property of every sort, character and description, the subject-matter of taxation on the part of the State.” Whatever might be said as to other portions of complainant’s line of road, as to which similar statutory provisions were not in existence, there could, in the face of this section, be no reasonable ground for belief that this especial portion of the line was exempt from taxation. As this section had never been construed by this court, and the question of the liability of this portion of the line to taxation, had not been determined, we see no reason for an assumption that a judicial construction of a statute should become a rule of property of a line of railroad, the liability of which to taxation must depend wholly or in part upon a statute which has never been construed.

The complainant says further, in effect, that at the time its predecessors purchased the property the taxes claimed had not been assessed against it, that there was no lien in favor of the State for such taxes, and the act upon which the proceedings to collect taxes are-being taken, was not upon the statute book, and that it acquired the property free of the State’s claim for taxes. It contends upon this view of the facts that its right or title to said property is superior to any claim or right of the State to subject the same to the payment of the back taxes claimed against it; that if such back taxes can be assessed and collected at all, it could only be against the owners of the property during the years for which taxes are claimed, and can not be so-collected from its purchasers, or by sale of the same. That if the statute intended to create a lien upon the property in the hands of purchasers for value, it would, to that extent, deprive its owners of their property without due process of law, and would be unconstitutional. This contention presents some complicated and difficult questions. All property in the State ought to bear its just burden of public taxation, and there can be no doubt, because it is well established by authority, that if property, lawfully liable thereto, escapes taxation for any one or more years, that it is competent for the Legislature to provide for the collection of such taxes in arrears. Perry and Hale Counties vs. Selma, Marion & Memphis R. R. Co., 65 Ala. 301; Perry County vs. Selma, Marion & Memphis R. R. Co. (and other cases); 58 Ala. 546; Tallman vs. City of Janesville, 17 Wis. 71; North Carolina R. R. Co. vs. Commissioners of Alamance, 82 N. C. 259; Burroughs on Taxation, 483. There is no doubt of the authority to collect such back taxes from the owners of the property during the time from which it escaped taxation, or from purchasers of the same whose rights or titles accrued after a lien for such taxes had been acquired by the State, by subjecting the property taxed to the payment of the same. If the State has the power to pursue- property for the payment of taxes when it has ceased to be in the possession or ownership of the persons to whom it belonged during the time for which such assessment was made, in the hands of innocent purchasers for value, such power must arise from some specific charge or lien upon the property in favor of the State for the taxes thereon. The question therefore arises, whether the complainant is such innocent purchaser for value. We do not think that the time for the assessment and collection of the taxes has passed, and. the taxing statute affixes no lien to the property, the State has made no assessment, or taken any other step to collect the same, that real estate can be pursued for back taxes when it has gone into the hands of innocent purchasers for value. The property sought to be taxed in this case is by the law of this State real estate. McClellan’s Digest, sec. 30, p. 286, Chapter 3099 Laws of Florida, act of 1879, sec. 3, p. 17. Under our laws as they existed prior to the Revised Statutes there was no lien upon such property for its taxes until fixed by; an assessment of the same. Spratt vs. Price, 18 Fla. 289, text 301, et seq.; L’Engle vs. Florida Central & Western R. R. Co., 31 Fla. 353. The only exception to this rule is that provided in various revenue acts, in effect, that assessors might assess real estate which had escaped taxation for any of the preceding years, not exceeding three, and that such - land should be liable for such back taxes in whosoever hands they might come. Both parties agree that this provision is riot applicable to the present case. We do not think the power of the State to subject the property in question to the payment of the back taxes claimed by the State rests upon the basis of a lien upon the property which enables the State to reach it in the hands of innocent purchasers for value. We do not think, under the facts of this case, that the complainant below is shown to be an innocent purchaser for value. In other words, it does not appear that it purchased the property after the time for the assessment and collection of the taxes had passed without any assessment or other effort on the part of the State to collect such taxes. We will, as briefly as is consistent with clearness, state the facts upon which these views are announced, together with some principles of law applicable thereto.

As different portions of the property rest upon different bases of fact, we will have to separate them in such statement. First, we will examine the nature of the title of the complainant to the line extending from Jacksonville to Chattahoochee, with branches to Monticello and St. Marks. For present purposes, it is only necessary to trace this chain of title to the acquisition of the property by Edward J. Reed and associates, in September, 1879. Their title was acquired at a sale on foreclosure of a statutory lien on behalf of the State against the Jacksonville, Pensacola & Mobile Railroad Company. The property was owned and operated by said Reed and associates, but under what firm or corporate name is not shown by the record, until February 8,1882. On this date Reed and his associates organized a corporation under the general laws of the State of Florida, under the name of the Florida Central & Western Railroad Company, and on the 28th of February, 1882, conveyed the property to said corporation. An inspection of these articles of incorporation on file in the office of the Secretary of State of the State of Florida shows that Reed and his associates were incorporated as the same persons who had pnrcha'sed the property at said foreclosure sale. This corporation, in February, 1884, was, with other companies, consolidated into the Florida Railway & Navigation Company. This latter corporation owned the property until May, 1889, and during the time the assessments complained of were made. The complainant acquired title through a purchase by one W. B. Cutting, as agent, at a judicial sale of the property; said Cutting and associates organized the complainant corporation. The complainant bought and took possession, with the assessments upon the property. We concede, however, that complainant would not be bound by such assessments, if they had been illegal as against the Florida Railway & Navigation Company, its immediate predecessor. Therefore the inquiry arises, whether the Florida Railway & Navigation Company was such innocent purchaser as we have hereinbefore stated could hold the. property as against the State’s claim for taxes. The only changes which had occurred in the ownership of the property, between the time of its. acquisition by Reed and his associates in September, 1879, and its assessments for taxation, were by a sale by the persons organizing a corporation to the corporation composed of themselves, and by a consolidation of the corporation owning it into another corporation of which it remained a constituent part until the assessments were made. It would be defeating the State of its taxes upon the merest technicality to hold that such transfers of the property as these constituted an innocent purchaser, as the transferees, Reed and his associates, came into the ownership of the property in September, 1879. At this date the time under the then existing laws had not expired when the State might assess and collect the taxes from the property. Secs. 45, 46, pp. 30, 31, acts of 1879, Chapter 3099. They took the property when it was liable to taxation for 1879, and. held it while it became and was liable for the taxes of 1880 and 1881. These taxes, while not liens upon the property, were obligations due by the owners and for which the property might be made liable. Can this obligation and liability be discharged by the transfer of the property by the owners as individuals to themselves in a corporate capacity? We think not; such, transfers are more nominal than real. In the case of Western Division of the Western North Carolina R. R. Co. vs. Drew, Governor, etc., 5 Woods (C. C.), 691, text 701, a question somewhat similar arose, in which it was determined that where persons holding as individuals railroad property subject to a lien, passed the title to a corporation composed of themselves clothed with corporate power, the lien was not thereby divested. 1 Morawetz on Private Corporations, sec. 239, thus states the same principal: “If an association of persons owning property subject to equitable claims obtains an act of incorporation, the property will remain subject to those claims after it is vested in the corporate name. * *” To similar effect also is Beach on Private Corporations, sec. 797. We have not been able to find a case where the precise question here involved (i.