stock and franchises of an Illinois corporation, the St. Louis, Alton, and Terre Haute Railroad Company, over and above its tangible property, for so much of its main line and the Alton branch thereof as were leased to, and operated in Illinois by, the Indianapolis and St. Louis Railroad Company, to whom, defendants claimed, the taxes in question were, therefore, properly charged.

The cause, by agreement of parties, was submitted upon the pleadings and exhibits filed; and, upon final hearing, a decree was rendered dissolving the injunction and dismissing the bill. From that decree this appeal is prosecuted.

The essential facts in the case are these: The Constitution of Illinois requires the General Assembly of that State to provide such revenue as may be needful by levying a tax by valuation, so that every person and corporation shall pay a tax in proportion to the value of his, her, or its property, such valuation to be ascertained by some person or persons to be elected or appointed in such manner as the General Assembly shall direct. Persons or corporations owning or using franchises and privileges are to be taxed in such manner as the General Assembly shall from time to time direct, the tax, however, to be uniform as to the class upon which it operates.

In pursuance of the Constitution, the General Assembly, in the year 1872, passed a general revenue law providing for the assessment of property, and prescribing the mode for the collection of taxes. It contained specific directions for the assessment of the different kinds of property owned by railroad companies, their visible or tangible property to be assessed under the heads of "railroad track," "rolling-stock," &c. In reference to their capital stock, the statute provided that the "capital stock of all companies and associations" (other than banking associations organized under the general laws of the State) "now or hereafter created under the laws of this State shall be so valued by the State board of equalization, as to ascertain and determine respectively the fair cash value of such capital stock, including the franchises, over and above the assessed value of the tangible property of such company or association," that value to be ascertained under such rules and principles as the board might deem equitable and just.

To the

The rule adopted by the State board was this: market or fair cash value of the shares of capital stock add the market or fair cash value of the debt of the corporation, (excluding that created for current expenses), and from this amount deduct the aggregate amount of the equalized or assessed valuation, as ascertained by the board, of all the tangible property of the corporation; the amount remaining to be taken as the fair cash value of the capital stock, including the franchise, which the board is required to assess against such corporation.

At the annual meetings of the State board held in each of the years 1873, 1874, and 1875, for the purpose of examining the abstracts of property, assessed for taxation in the several counties, as returned to the auditor of State, and for the purpose, also, of equalizing assessments, the question arose as to the mode in which the capital stock of the St. Louis, Alton, and Terre Haute Railroad Company should be assessed for taxation.

The difficulties which attended an intelligent discharge of that duty will be comprehended by a statement of the relations of that corporation to the complainant.

On the 11th of September, 1867, the complainant, by a written contract of lease with the St. Louis, Alton, and Terre Haute Railroad Company, acquired the right and assumed the duty of managing and carrying on, for the term of ninety-nine years, commencing June 1, 1867, the business of the principal or main line of the latter, one hundred and eighty-nine miles in length, extending from Terre Haute, Ind., to East St. Louis, Ill., and also of the Alton branch, four miles in length, subject to certain prescribed terms and conditions.

The tenth article of the lease is as follows:

"The said party of the first part (the complainant), its successors and assigns, shall and will, at all times during the term aforesaid, pay or cause to be paid any and all taxes, assessments, and imposts of whatever kind which shall or may at any time during such term be charged, levied, assessed, or imposed upon the said main line of said railroad and the said Alton branch thereof, or upon either or any part of either of the said railroads or their appurtenances, or upon any business or transactions done upon them or either of

them, or upon any income arising therefrom, or upon any property whatsoever, the use of which during said term is hereby agreed to be furnished to the party of the first part, or which may be charged against or imposed upon the said party of the second part (the St. Louis, Alton, and Terre Haute Railroad Company), its successors or assigns, for or on account of its or their ownership of said railroads, or either or any part of either thereof, or of such property or any part thereof: Provided, however, that nothing in this contract contained shall be so construed as to render the party of the first part in any way liable for the tax specifically upon the income of the holders of the bonds or stocks of the party of the second part."

Under this lease the complainant took possession of all the property connected with or essential to the business of the principal line and the Alton branch of the lessor.

Some doubt having been expressed as to the validity of the lease under the laws of Illinois, an act of the General Assembly of that State, approved March 11, 1869, directs that the lease "be and stand confirmed according to the terms" thereof; and the second section provides:

"The said lessees, their associates, successors, and assigns, shall be a railroad corporation in this State, under the said style of 'The Indianapolis and St. Louis Railroad Company,' and shall possess the same or as large powers as are possessed by said lessor corporation, and such other powers as are usual to railroad corporations. Said Indianapolis and St. Louis Railroad Company may, and are hereby authorized to, extend said line of road from any point on the same between the cities of Pana and Litchfield, on said road, or from either of said points westward to the Mississippi River opposite Louisiana, or any point below, not exceeding fifteen (15) miles, in the State of Missouri, with a branch thereof to the city of Quincy, in the State of Illinois, and the same to connect with the railroad bridge over said river at said city of Quincy."

At its annual meetings, in 1873, 1874, and 1875, the State board made assessments upon the capital stock and franchises of the various railroad companies of the State over and above their tangible property respectively. Having ascertained the fair cash taxable value of the capital stock, including the franchise of the St. Louis, Alton, and Terre Haute Railroad Company, without any reference to the lease made by the latter, it

fixed the sums of $2,918,184, $1,125,139, and $1,004,416 as the proportion of such valuation which should be distributed for the years 1873, 1874, and 1875, respectively, to the counties on the line of the leased railroads, assigning to each county, in conformity to the rule prescribed by the statute, such proportion of those annual assessments as the length of line in such county bore to the entire length of the leased railroads in the State. The assessments thus distributed to the several counties through which the leased railroads passed were charged to the Indianapolis and St. Louis Railroad Company. The balance of the assessment upon the capital stock and franchise was distributed to the counties upon the lines which the St. Louis, Alton, and Terre Haute Railroad Company operated, and were charged directly against it.

While the officers of State deny that the assessments were upon the capital stock of the Indianapolis and St. Louis Railroad Company, they evidently intend that the warrants based upon those assessments shall be levied upon such of the leased property as by the laws of Illinois can be seized for the payment of taxes against corporations created under the laws of that State.

Whether the assessments made by the State board, and the intended levy by the county collectors of the warrants in their hands, are in accordance with the laws of Illinois, are the fundamental questions in this case.

In support of the negative of these propositions, the counsel for the complainant insist that the Indianapolis and St. Louis Railroad Company is a corporation created by the laws of Indiana, with stock subscribed and held under the authority of that State, and with an organization there and not elsewhere; that neither before nor after the passage of the act of March 11, 1869, did the stockholders or officers of the Indianapolis and St. Louis Railroad Company organize, subscribe for stock, elect officers, or do any other act to become a corporation under its provisions; that no capital stock of the corporation referred to in that act was ever subscribed by the lessee therein referred to, and that the complainant owns no capital stock except that owned by it as a corporation existing under the laws of Indiana; that the act of March 11, 1869, construed in reference to its objects intended to be attained, and the constitutional powers

of the General Assembly of Illinois, did not make the Indianapolis and St. Louis Railroad Company a corporation of that State, but amounts only to a license to an Indiana corporation to exert its corporate powers in Illinois, by holding and operating a line of leased railroads within her limits; that the State board had no authority to assess the capital stock and franchise of an Indiana corporation; and that the property managed and controlled by the latter, whether acquired prior to or held under the lease of 1867, could not be seized to pay taxes due upon any assessment of the capital stock of the St. Louis, Alton, and Terre Haute Railroad Company.

These propositions, presenting, it must be conceded, questions of some difficulty, will be noticed in the progress of this opinion.

There can be no doubt that the Illinois revenue statute of 1872 was intended to meet the provisions of the State Constitution, which required such legislation as would subject to taxation, according to its value, every kind of property, whether owned by individuals or corporations. It was not supposed that the constitutional duty imposed upon the General Assembly would be discharged by taxing simply the tangible property of railroad companies. Hence a tax was imposed upon their capital stock, including the franchise, over and above their tangible property. "Capital stock," within the meaning of the Illinois statute, does not mean shares of stock, but "the aggregate capital of the company;" which includes "the value of the right to use this tangible property in a special manner, for purposes of gain." We so held in State Railroad Tax Cases (92 U. S. 575), where the provisions of this revenue statute were critically examined. It is to be observed in this connection that the State board of equalization was not authorized to assess the capital stock of companies or associations managing property or engaging in business in Illinois, unless they were created under the laws of that State. Such seems to be the settled construction of that statute by the Supreme Court of Illinois. In Western Union Telegraph Company v. Leib (76 Ill. 172) this language is held: "We are unable to find any authority in the act for assessing the capital stock of companies or associations doing business in the State, but incorporated under the laws of another State.