Supreme Court of United States.
Mr. David L. Withington and Mr. Aldis B. Browne, with whom Mr. Alexander Britton and Mr. William R. Castle were on the brief, for appellant.
Mr. Charles R. Hemenway, Attorney General of the Territory of Hawaii, with whom Mr. Mason F. Prosser was on the brief, for appellee.
*141 MR. JUSTICE HOLMES delivered the opinion of the court.
This is an appeal from a judgment affirming a decision of the Tax Appeal Court and sustaining a tax upon the appellant. The appellant objected to the tax on the grounds that its franchise was derived from an act of Congress and therefore was exempt from taxation, and that its charter also exempted it in terms. These objections, taken below, were argued at length before us.
The charter was granted by the Republic of Hawaii on July 7, 1898, the day on which Congress passed the resolution of annexation, and doubts having been felt as to the right of the Hawaiian legislature to grant a charter at that time (see 22 Op. Att. Gen. 574; Ibid., 627), the organic act declared that "Subject to the approval of the President . . . all franchises granted by the Hawaiian government in conformity with the laws of Hawaii, between the seventh day of July, *142 eighteen hundred and ninety-eight, and the twenty-eighth day of September, eighteen hundred and ninety-nine, are hereby ratified and confirmed." Act of April 30, 1900, c. 339, § 73, 31 Stat. 141, 154. It is contended that the effect of this section was to make the charter an act of Congress by adoption. In our opinion this is a mistake. There is no doubt that local legislation under the authority of Congress previously granted is treated as emanating from its immediate, not from its remote source, in determining rights and liabilities. Kawananakoa v. Polyblank, 205 U.S. 349, 353, 354. See Matter of Moran, 203 U.S. 96, 104. A general ratification like that of existing laws in § 6 would have no greater effect. We discover nothing in the words just quoted from § 73 to indicate that Congress had this particular franchise in view, or meant to adopt it and give it a superior source, or to do anything more than to supply the power that by accident might have been wanting. See Miners' Bank v. Iowa, 12 How. 1, 8; Murphy v. Utter, 186 U.S. 95, 106. We need not pursue further this part of the objection to the tax, except to remark that, in view of the obvious purpose, it properly was admitted that July 7 was not excluded from the ratification by the word "between." See Taylor v. Brown, 147 U.S. 640. For it also was admitted at the argument before us that if there was no exemption in the charter the appellant had no case, and we are of opinion that there was none.
The tax in question is a property tax, and the effect of the decision is to uphold a valuation of the whole property as a going concern, and as more than a mere congeries of items; or in other words, an addition of half a million dollars to the appellant's valuation, for the franchise of the company. The appellant says that this was contrary to § 17 of its charter, construed in the light of the scheme disclosed. That section provides that "the following charges shall be lawful upon the income of said railway: 1st. The expense of operating, repairs, renewals, extensions, interest, and every other cost and charge properly or necessarily connected with the maintenance and *143 operation of said railway. 2nd. Dividends may be paid to the stockholders not to exceed eight per cent. on the par value of the stock issued. 3d. A sinking fund may be created for the redemption of any bond which may be issued or other record debt and the capital upon the expiration of the franchise. Provided [that the amount is limited as set forth]. 4th. The excess of income shall be divided equally between the Government of the Republic of Hawaii and the stockholders of said corporation." It is said that here is a complete plan for the division of the income, declaring what charges shall be lawful, and that only such taxes are allowed as fall under the words, "other charge properly connected with the maintenance and operation of the road."
The taxes authorized as such charges are thought to be limited to a license tax not to exceed ten dollars on each passenger car used, imposed by § 31, and to the provisions of § 30. The latter section exempts from duty material produced in and imported from the United States, and goes on to say that "the property of said association and others shall not be liable to internal taxation while said railway is under construction, provided that as fast as completed and equipped the completed and equipped portion shall become liable to such taxation." It is said that when the charter was granted real and personal property were assessed for taxation "separately as to each item thereof for its full cash value," with provisos deemed not to be material, Rev. L. Hawaii, 1905, § 1216, that § 30 contemplates a taxation of this kind, and that a taxation of the franchise would be double taxation and was excluded. It is true that one of the provisos in § 1216 taxes going concerns as wholes, but § 30 is thought to show a choice of the other method. It is contended that the charter by fair implication contracts against any other charges, especially in view of the ultimate division of the excess of income, after the payment of eight per cent dividend. If the dividends do not exceed eight per cent the tax will fall wholly on the stockholders, contrary to the fair understanding of what the charter holds out.
*144 The argument of which we have given a summary outline is far from establishing such a clear renunciation of the right to tax as the cases require. Metropolitan Street Ry. Co. v. New York State Board of Tax Commissioners, 199 U.S. 1. It appears to us very questionable whether the phrase, "charges properly or necessarily connected with the maintenance and operation of the road," has any reference to taxes. It points in another direction. Taxes are left unmentioned in § 17, and the liability to them is assumed. The language of § 30 does not import the imposition of a tax that otherwise would be excluded. It takes the liability for granted, and relieves the company from the burden for a certain time. The drift of the section cannot be made clearer by lengthy restatement. It starts with exoneration and merely saves the right to tax the portions completed by a proviso which, in this case, fulfills the proper function of that much abused term. If any doubt were raised by § 17, which does not seem to us to be the case, it would be relieved by this further section of the same act. Nothing else seems to us to need mention in the present posture of the case.
Judgment affirmed.
[1] Substituted for Holt, assessor.
