Whitfield, C. J.,
delivered the opinion of the court.
After the most careful and protracted consideration of this ease, we have been driven to the conclusion that the $10 per mile additional privilege tax imposed by the act of 1898 (Laws 1898, p. 8, c. 5), which the reporter will set out in full, is in that respect unconstitutional as impairing the obligation of a contract, and as depriving the appellant of property without due process of law. It was settled in the case of Stone v. Y. & M. V. R. R. Co., 62 Miss., 643, 52 Am. Rep., 193, that that railroad had “the unquestionable right from time to time by its board of directors to fix the rates at which it would transport over its railroad, provided those rates should not exceed the maximum prescribed by its charter; that that provision was a contract; that on the faith of that contract capital was invested and the enterprise set on foot, and that it was not allowable for the legislature subsequent to the granting of the charter in 1882 to interfere with the exercise by the railroad of its plainly granted contract rights; that those rights were secure beyond the right of legislation, and could not be impaired.” This decision was made construing the very section 6 of the charter of appellant now under consideration, and which section the reporter will set out in full.
There are several things to be noted which we think demonstrate the unconstitutionality of this act in this respect beyond controversy. Eirst. This additional privilege tax is an extraordinary tax, one over and beyond the usual privilege tax required to be paid by other railroads doing similar business in this state. Second. It is clear 'that the imposition of this privilege tax is an exaction made solely because of the enjoyment by the appellant of this contract privilege in its charter. It was not for the legislature to extend by the charter contract the privilege of regulating its rates within certain limits to this appellant with one hand, and then with the other, after the road had been built, practically take away the privilege by the imposition of this privilege tax. Third. The appellant; *606whilst it has the privilege of fixing its own rates, must do so within limits. There is a maximum limit beyond which it cannot go, and there is no room, therefore, for the argument, if it were worth anything, that the railroad company might recoup itself against this additional privilege tax by raising its rates; for it is perfectly manifest that, if the legislature had the power to lay this additional privilege tax of $10 per mile, it had the power to lay an additional privilege tax of $1,000 per mile, and so it could very easily lay a privilege tax like this (whilst there is a maximum limit contained in the charter at least) so as to compel the company either to surrender its charter privilege or to actually lose money by continuing to enjoy and exercise it. Fourth. This $10 per mile additional privilege tax is a burden imposed on the corporation as a condition to its .further exercise of the corporate right conferred by its charter. There are few limitations, indeed, upon ‘the right of the sovereign to exercise the taxing power, one essential to the existence of government; but it is just as certain that if something is denominated a tax, which is in essence not a tax, but a penalty, and which, in its operation, necessarily impairs the obligation of a contract, or deprives of property without due process of law, that something, whatever it may be called, and no matter by what legislation created, cannot stand the test made when its constitutionality is assailed. We’are clearly of the opinion that this legislation attempts to create a privilege tax, "and not an ad valorem 'tax in any sense of the word. Viewed as a privilege tax, we are constrained to declare that this legislation, in the particular respect indicated, violates both the contract clause of the constitution of the United States and the fourteenth amendment thereof. If, however, the argument made with such exceeding ability and ingenuity, that this is to be treated as an ad valorem tax, could prevail, the result would be just as fatal to the appellee. That argument is that this additional $10 per mile alleged privilege tax is constitutional and ‘collectible, for the reason that no discrimination was thereby *607created in privilege taxation, because the basis of the imposition of this privilege tax was this very immunity granted by the charter of the appellant, which immunity, it is urged, was itself an element of value in that it gave to the company power to increase its earnings, that it was itself, in other words, property which was subject to taxation, but, if this view is adopted, such taxation would most manifestly be taxation of property, as property, that is to say, ad valorem taxation. We have already held, in the course of this litigation, on demurrer, that the appellant would be liable, if liable at all, for this additional privilege tax, whether the railroad company had ever used or exercised the privilege granted by the charter or not. So that,whether the company availed itself of the privilege to regulate the rates or did not so avail itself, if this so-called privilege tax could be collected at all, its collectibility would not depend, in any sense, upon the fact whether or not the railroad company had availed itself of its said charter privilege. Now the legislature, in this act, has said itself as a matter of law that the existence in the charter, whether availed of or not, of this privilege, is, according to the argument of appellee’s counsel, an element of value justifying the imposition of this tax expressly denominated an additional privilege tax. The commission was directed to classify railroads for privilege taxation, under this act, into first, second, and third class, according to gross earn-, ings, and into narrow gauge according to the physical constitution of the road; but, that done, the Eailroad Commission did all it was directed to do, except mere clerical work. The legislature itself then declared that this additional tax should be imposed upon each and every class of railroads, whether first, second, or third class, or narrow gauge, if only there was in the charter of' such road this clause conferring the privilege of rate regulation within certain limits. In other words, it is perfectly clear that this so-called additional privilege tax is not imposed because of the gross earnings of the company, and not because of any capacity of the company to pay, but solely be*608cause of the existence of this privilege in its charter, and without reference to whether as a matter of fact this privilege did add anything of value to the property of the railroad or not. Necesasrily such a privilege tax so viewed would be discriminatory, since it is laid solely with reference to the mere existence of this charter right, and that, too, whether it be exercised or not, and whether it is of any financial value or not. It is inescapable that, so viewed, this so-called privilege tax is, in effect, a penalty imposed upon the appellant for the exercise of its contract right granted by its charter and confirmed by this court. But, once more, if we could consider this tax of $10 per mile as an ad valorem tax assessed upon the appellant on the theory that the existence of this charter right gives to the appellant an element of property, then manifestly a tax laid upon it as such — that is to say, as property — is an ad valorem tax, and not a privilege tax at all. In the revenue chapter, it is expressly provided that there shall be classification and assessment of railroad property for ad valorem taxation by the Railroad Commission, and that a valuation of such railroad property shall be made in the light of and with reference to the capacity of the company for gross earnings, both freight and passenger, and also in the light of and with reference to its franchise. If, therefore, this additional $10 per mile, so-called privilege tax, is to be defended on the ground that it is in the nature of a tax on a property value conferred by this privilege in the charter, then it was the duty of the Railroad Commission to consider this privilege as an element of property value in the valuation made by the Railroad Commission for ad valorem taxation under the general law; and it is reasonable to presume that the Railroad Commission discharged its duty in this respect as defined by the law, and, if so, then the very element of property value, which it is contended this charter privilege gives the appellant company, must have been taken into consideration by the Commission in fixing the ad valorem taxation. Whether, therefore, *609this additional $10 per mile is to be treated as a privilege tax or as an ad valorem tax, in either case the appellee must fail in its suit.
Wherefore the judgment is reversed and the suit dismissed.