In 1851, by “An Act to incorporate the Illinois Central Railroad company” (1851 Private Laws of Illinois 61, hereinafter, the charter), the Illinois General Assembly authorized construction of a
The instant dispute arises from the claim of Robert H. Snow, an Illinois taxpayer, that State funds are being disbursed to effect the collection from Gulf of the illegal 7% tax on charter properties. He brings this action under “An Act in relation to suits to restrain and enjoin the disbursement of public moneys by officers of the state” (Ill. Rev. Stat. 1975, ch. 102, par. 11 et seq.) (the Public Monies Act). The essence of the action is that this 7% tax was an exemption personal to IC, not applicable to Gulf, and is being illegally collected in lieu of other taxes which would ordinarily be due from the charter line. Marvin E. Schatzman (as a Cook County taxpayer), Edward J. Rosewell (as Cook County treasurer), and Stanley T. Kusper, Jr. (as Cook County clerk), intervened. On cross motions, the circuit court rendered summary judgment for the plaintiff on May 17, 1976, finding that under the plan of reorganization the tax on the charter line did not become an obligation of Gulf, and Gulf did not acquire IC’s special tax exemption. The chancellor decreed IC dissolved, enjoined the State from continuing to collect the charter tax from Gulf and from expending public funds in connection therewith, and ordered the Director of the Department of Local Government Affairs, effective August 10, 1972, to “assess the Charter Property in the same manner as he assesses the property of other railroads in the State” and to “transmit the lists and information to the various proper taxing authorities of the Hlinois counties in which Charter Property is located.”
On appeal, Gulf urges that the charter property tax obligation and corresponding immunity from other tax were contract rights passed to Gulf by virtue of the
The State agrees with Gulf that the 7% charter tax is due and owing, but contends it is due from IC; that the contract rights created in the charter between IC and the State may not be unilaterally abrogated by the IC or by the powers of the Commission to approve the Plan. Additionally, the State asserts that Snow lacks standing to attack the voluntary payment of a tax by another, and that administrative review, rafher than suit under the Public Monies Act, is the proper vehicle for this action.
With reference to the question of standing and appropriateness of this action under the Public Monies Act, the State asserts that the amounts collected by the 7% tax total over $5.6 million per year, whereas the $41,400 expended in auditor’s salary for its collection are de minimis, and that therefore Snow and the other taxpayers he represents have no interest in preventing the token expenditure. The State ignores the fact evidenced by the record that the time of literally hundreds of State employees is devoted in some part to the assessment and collection of this tax. Furthermore, there is no requirement that a taxpayer’s individual interest in a suit under the Public Monies Act be substantial. In the case of Krebs v. Thompson (1944),
The State asserts that administrative review is the appropriate method for determining the correctness of a tax, and that the Public Monies Act is an inappropriate vehicle because it was not intended to enlarge the rights of citizens or extend the established jurisdiction of a court of equity. (Daly v. County of Madison (1941),
It is the position of both Gulf and the State that the imposition of the charter tax in the years 1972 to 1975 was lawful, but their rationales differ. Gulf claims that all of IC’s rights and obligations, including the charter tax and exemption from other taxes, were transferred to Gulf under the “plenary power” of the Commission to effectuate such transfer. The State argues that the charter constitutes a contract between IC and the State; that it was beyond the power of the Commission, by approving the plan of reorganization, to transfer the charter properties, rights, and obligations to Gulf in abrogation of the charter contract; and that, therefore, IC has not been dissolved and the charter tax is still due and owing from it.
Plaintiff Snow maintains that the tax rights and obligations derived under the charter were personal to IC and were nontrans ferable without the consent of the Illinois General Assembly; that the language of the charter itself anticipates and authorizes the sale of the IC charter
The history of IC’s organization is well recorded in the judicial opinions of this State. Most of the land was provided to the IC by land grant, from the Federal government through the State.
“The Congress of the United States *** in 1850 passed an act granting to the State of Illinois a right of way through the public lands and the ownership of every alternate section of land for more than six miles in width on each side thereof, to aid the State in constructing the railroad finally built by [IC].” (People v. Illinois Central R.R. Co. (1916),273 Ill. 220 , 234.)
“The act provided that the lands granted should be subject to the disposal of the legislature of Illinois and be applied to the construction of the said road and branches, and to no other purpose. *** By section 15 of the charter appellee was granted all the lands ceded to the State by the act of Congress of 1850; also depot grounds in the city of Cairo, the right of way and all the improvements made thereon by the Internal Improvement Commission and the Great Western Railway Company under the acts of 1837. This latter property was in addition to that ceded to the State by the act of Congress of 1850.” (State v. Illinois Central R.R. Co. (1910),246 Ill. 188 , 197-98.)
“When this charter was granted, the privilege or franchise to build this railroad was not considered of any special value. In the fifteen years, more or less, previous to the granting of this charter the public authorities had made several attempts to build a railroad similar to the one that was finally constructed by appellant company, and in one act the State had appropriated three and a half million dollars for that purpose. *** The year this charter was granted, Gov. French, then chief executive of the State, said: ‘The constitution having wisely debarred the State from again involving its credit in wild and visionary schemes of internal improvement, their chance of success rests upon individual skill, capital and enterprise.’ ”People v. Illinois Central R.R. Co. (1916), 273 Ill. 220 , 234-35.
The land then granted to IC by the charter was largely “undeveloped and its ultimate value entirely problematical.” People v. Illinois Central R.R. Co. (1916),
“In passing the Land Grant act, granting to the State the alternate sections of land afterward received by appellant company from the State, Senator Stephen A. Douglas in the United States senate said: ‘*** These lands have been in the market from fifteen to thirty years. The average time is about twenty-three years. But they will not sell at the usual price of $1.25 per acre because they are distant from any navigable stream or a market for produce. ***’ ” People v. Illinois Central R.R. Co. (1916),273 Ill. 220 , 234.
Likewise, the contractual nature of the charter and the 7% charter tax imposed on IC therein are firmly established. (State v. Illinois Central R.R. Co. (1910),
“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.” (Emphasis added.) 1851 Private Laws of Illinois 72.
Plaintiff Snow asserts that the above section of the charter contemplates the sale of the charter line and that the tax exemptions indicated therein are effective only until the property is sold and conveyed. He also asserts the transaction between IC and Gulf constituted such sale and conveyance of IC properties, which sale to Gulf cut off the tax exemption and did not effect a transfer to Gulf of the right and obligation to pay the charter tax in lieu of other taxes. The State, on the other hand, asserts that the above charter section contemplated only the sale of non-right-of-way properties to raise funds from time to time. Such properties would lose their tax-exempt status upon transfer to a third party. This section does not, it is asserted, speak to the sale of the railroad as an entity and, consequently, does not speak to the question of charter rights and obligations in the hands of a purchaser of the railroad as an entity. Both the State and Gulf urge, in this regard, that the intent of the charter may be gleaned by referring to the subsequent actions of the legislature in 1885 (Ill. Rev. Stat. 1975, ch. 114, par. 165), and in 1933 (Ill. Rev. Stat. 1975, ch. 32, par. 157.160). The former act provides, in terms virtually identical to those used in the latter, that nothing in the act “shall be so construed as to authorize or permit the Illinois Central Railroad Company to sell the railway constructed under its charter, *** except subject to the rights of the state under its contract with said company, *** under the provisions of said
The circuit court concluded (as was suggested by Snow) that section 22 of the charter contemplated a sale or conveyance of the railroad as an entity. This interpretation is erroneous. The cited portion of section 22 refers to two broad classes of properties: those “lands *** hereby authorized to be conveyed,” and the “other stock, property, and effects of said company.” (Emphasis added.) We believe the phrase “lands *** hereby authorized to be conveyed” necessarily refers to the land adjacent to and along the railroad right-of-way, the sale of which was specifically provided for by section 16 of the charter. (1851 Private Laws of Illinois 70.) That the sale of less than all of the railroad property was authorized by the charter terms is implicit in the use in section 22 of the specific term “lands” rather than the more general term “properties.” Furthermore, immediately after the reference to “lands *** authorized to be conveyed,” the charter deals with “other stock, property, and effects ***.” (Emphasis added.) Although we are unable to conclude that these provisions authorize the sale of the railroad as an entity, we are likewise unable to infer from these and other charter terms that the IC was forbidden to make such a sale. No language in the charter may be fairly interpreted to prohibit such sale, and we decline the State’s invitation to construe the acts of the legislature, 34 years or more after the charter’s acceptance by IC and enactment by the General Assembly, to imply such a term in the contract between IC and the State.
The State nevertheless asserts that, where a corporation such as a railroad has been granted a charter franchise
“[AJny carrier *** participating in *** any transaction approved by the Commission [under section 5] *** shall have full power *** to carry such transaction into effect and to own and operate any properties and exercise any control or franchises acquired through said transaction without invoking any approval under State authority; and any carriers *** participating in a transaction approved or authorized under the provisions of this section shall be and they are relieved from the operation of *** prohibitions of law, Federal, State or municipal, insofar as may be necessary to enable them to carry into effect the transaction so approved or provided for ***, and to hold, maintain, and operate any properties and exercise any control or franchises acquired through such transaction. ***”
The power of the Commission to approve transactions under section 5 in derogation of State law, of course,
It is, of course, clear that an agency of Congress has authority to act only within the scope of powers delegated to it by statute. Relevant to an understanding of the scope of the authority given the Commission under 49 U.S.C. sec. 5 is the brief history provided by the Supreme Court of the development and regulation of our nationwide system of railroads:
“The basic railroad facilities of the United States were constructed under state authorization and restrictions by corporations whose powers and limitations were prescribed by state legislatures, -or resulted from limitations on the states themselves. Construction in reference primarily to local or regional transportation needs created duplicating and competing facilities in some areas and provided inadequate ones in others. Expansion necessary to serve advancing national frontiers was stimulated by extensive subsidies from the Federal Government, largely in the form of land grants. But the stress and strain of World War I brought home to us that the railroads of the country did not function as a really national system of transportation. That crisis also made plain the confusions, inefficiencies, inadequaciesand dangers to our national defense and economy flowing from the patchwork railroad pattern that local interests under local law had created.
The demand for an integrated, efficient and coordinated system of rail transport, equal to the needs of our national economy and defense, resulted in the Transportation Act of 1920. In a series of decisions on particular problems, this Court defined the general purposes of that Act ***. The tenor of all of these was to confirm the power and duty of the Interstate Commerce Commission, regardless of state law, to control rate and capital structures, physical make-up and relations between carriers, in the light of the public interest in an efficient national transportation system. [Citations.]
As a means to this end, the 1920 Act required the Commission to prepare and adopt, a plan for nationwide consolidations of the railway properties of the country. ***
The Transportation Act of 1940 relieved the Commission of formulating a nationwide plan of consolidations. Instead, it authorized approval by the Commission of carrier-initiated, voluntary plans of merger or consolidation if, subject to such terms, conditions and modifications as the Commission might prescribe, the proposed transactions met with certain tests of public interest, justice and reasonableness, in which case they should become effective regardless of state authority. *** This Court has recently and unanimously said in reference to this Act, ‘Congress has long made the maintenance and development of an economical and efficient railroad system a matter of primary national concern. Its legislation must be read with this purpose in mind. ’ SeaboardAir Line R. Co. v. Daniel, 333 U.S. 118 .” Schwabacher v. United States (1948),334 U.S. 182 , 191-93,92 L. Ed. 1305 ,68 S. Ct. 958 , 963-64.
The Commission’s approval of a section 5 transaction is dependent upon, among other considerations, a finding that such transaction will be “consistent with the public interest.” (Schwabacher v. United States (1948),
“The phrase ‘consistent with the public interest,’ as judicially construed, means compatible with, or not contradictory or hostile to the public interest. See Pacific Power and Light Co. v. Federal Power Comm., 111 F. (2d) 1014, 1016. As was stated by the Supreme Court in New York Central Securities Corp. v. United States,287 U.S. 12 , 25:
‘The term “public interest” *** has a direct relation to the adequacy of our transportation system, to its essential conditions of economy and efficiency and to appropriate provision and best use of transportation facilities.’ ” (Illinois Central Gulf R.R. Co. — Acquisition—Gulf, Mobile & Ohio R.R. Co., Illinois Central R.R. Co. et al. (1971),338 I.C.C. 805 , 841.)
The Commission, further, made a specific finding that the transaction was in the best interest of the public. (
It has been observed that “[t]he law does not expressly dissolve the selling corporation, but it leaves it without stock, officers, property, or franchises. A corporation without shareholders, without officers to manage its business, without property with which to do business, and without the right lawfully to do business, is dissolved by the operation of the law which brings this condition into existence.” (Rochester R. Co. v. Rochester (1907),
Snow urges that, although approval of the Plan was sufficient to effect a sale of the IC properties to Gulf, such approval did not confer upon Gulf the IC’s charter tax status. He maintains that these tax exemptions and obligations did not survive the sale and conveyance of the charter line properties to Gulf. Snow’s argument is three-pronged. First, section 22 provides that the tax-exempt status of the charter property existed only until the charter property was sold and conveyed. Second, he argues that the so-called Charter Immunity Cases (cited later) establish that tax exemptions created as to one corporation are personal to that corporation and are not part of the general franchises which may be transferred upon sale to another corporation. Instead, the new
Snow’s first argument fails because section 22 of the charter, as discussed above, cuts off the tax exemption of charter properties “hereby authorized to be conveyed.” Section 22 does not deal with the sale of the charter line as an entity, or with the transfer or loss of the special tax status incident thereto. No other charter provision deals with the tax status of the charter properties in the hands of a third party. However, in the absence of a specific charter provision or a valid act of the General Assembly expressly providing therefor, we hold that the tax exemption and charter tax granted IC were personal to IC and could not pass on sale to Gulf. The body of law evolved in the 10 so-called Charter Immunity Cases amply supports this conclusion. Yazoo & Mississippi Valley R.R. Co. v. City of Vicksburg (1908),
As discussed above, Congress’ power to fully occupy a field of law is not necessarily coextensive with the exercise of that power. On the other hand, matters of State taxation are reserved to the States under the tenth amendment to the Constitution. (See Thomson v. Union Pacific R.R. Co. (1870), 76 (9 Wall.) U.S. 579, 591,
This conclusion is further based on the fact that the Commission did not address, much less attempt to adjudicate, the question of such charter tax exemptions in its detailed, 76-page opinion approving the transfer. The Plan itself nowhere makes any explicit reference to the charter tax obligations of IC or of their transfer to Gulf. Only in exhibit C to- the Plan, entitled “Indenture Sale, Assignment and Transfer,” is any reference whatsoever made to IC’s charter tax obligations. Paragraph 3(e) thereto provides that Gulf “assumes all contracts, obligations or liabilities *** and agrees that any lien of the State *** upon, or right to tax, the charter line property *** in accordance with the provisions of the charter ***, approved February 10, 1851, shall not be released, suspended, modified, altered, remitted or in any manner diminished or impaired as against [Gulf] but the same, as applicable to the charter line property *** shall be and remain *** binding upon [Gulf].” This provision appears to reflect IC’s desire and Gulf’s assent that IC be held harmless by Gulf for any charter taxes thereafter imposed upon IC by the State. Further, no express reference to the charter tax exemptions is made anywhere in the Plan, the exhibits, or the opinion of the Commission.
Fairly considered, the Commission’s approval of the plan of reorganization, which plan contained no reference
It remains for this court to determine whether these generally applicable State taxes can and should be applied retroactively upon Gulf. Gulf maintains that the taxes may be assessed and collected only pursuant to statute, and that there is no statutory scheme which permits such retroactive application; that reassessment may be accomplished only by way of administrative review prior to finalization of the assessments, and once these have been certified to the county clerk by the Department of Local Government Affairs there can be no reassessment. The tax action which the chancellor ordered the Department of Local Government Affairs to take herein is erroneously characterized by Gulf as a “reassessment.” Such characterization is based upon the following: section 80 of the Revenue Act of 1939 (Ill. Rev. Stat. 1975, ch. 120, par. 561) provides that all real estate property be assessed as a unit; Gulf’s charter line property must necessarily be included in any such unit; there is no statutory authority for assessing the charter line separately; and, therefore, the Gulf property was fully assessed for the years in question (albeit, Gulf concedes, “perhaps erroneously”). As applied to the charter line property, historically treated as a separate tax entity, this argument clearly elevates form over substance. Sections 79 through 90 of the Revenue Act of 1939 (Ill. Rev. Stat. 1975, ch. 120, pars. 560-571)
The circuit court’s judgment order provided that, effective August 10, 1972, “the Director of the Department of Local Government Affairs shall assess the Charter Property in the same manner as he assesses the property of other railroads in the State and he shaH transmit the lists and information to the various proper taxing authorities of the Illinois counties in which Charter Property is located. ” (Emphasis added.) Section 86 of the Revenue Act of 1939 (Ill. Rev. Stat. 1971, ch. 120, par. 567) contemplates (with minor variations) that the equalized assessed value of the railroad properties subject to assessment shall be listed and taxed in the several taxing districts in the proportion that the length of track within the taxing district bears to the total length of track owned or used in the State. Thus, the circuit court was in error in its concluding phrase, “in which Charter Property is located,” for this phrase has the effect of directing the transmission of such assessment lists only to the taxing districts in which the charter line is located.
By the order of the circuit court, Gulf was responsible for property taxes as of August 10, 1972. One of the attorneys for the plaintiffs pointed out at oral argument that section 81 of the Revenue Act of 1939 (Ill. Rev. Stat. 1971, ch. 120, par. 562) requires new railroad companies to file their schedules “pertaining to real property in January, and pertaining to personal property on April 1 next after the location of their road.” We interpret this to mean that filing was required by January and April 1973, respectively, and therefore conclude that the trial court erred in requiring Gulf, a new corporation, to be responsible
As stated above, there is adequate statutory authority to hold Gulf legally subject to retrospective taxation for the years 1973 to 1975. Separate considerations govern whether, for equitable reasons, Gulf should'be required to make such payments in addition to the 7% gross receipt tax concededly paid for 1973, 1974 and 1975. Because there was no express charter authorization for the transfer of IC’s charter tax status to Gulf, and because the law of the Charter Immunity Cases holds such attempted transfers invalid in the absence of express legislation, Snow argues that Gulf knew or should have known that such tax status could not be transferred to it by IC. He further urges that the judgment makes no change in existing law, unlike cases where this court has provided only prospective application. Gulf, to the contrary, asks not to be subjected to “double taxation” by the retrospective application of this judgment. We believe the circumstances of this case require us to fashion a judgment which does not impose an inequitable tax burden upon Gulf. The limited effect of the Commission’s approval upon IC’s charter tax status was not clearly foreshadowed in view of the constitutional powers of Congress to regulate commerce between the States and the powers to suspend State law bestowed upon the Commission in section 5(11). Moreover, Gulf could reasonably have taken various acts of the State legislature, subsequent to the charter, to indicate that the State would attempt to hold Gulf responsible for the payment of the charter tax. Gulf could likewise reasonably have expected the State to view the charter tax as the fair equivalent of other taxes, and could reasonably have expected the State to take the posture that the State did ultimately take — to accept the charter taxes in lieu of all other taxes. Based on the foregoing, we determine that partial retrospective application is appropriate. The trial court’s judgment order is modified to provide that if any additional tax is found
The judgment of the circuit court is hereby affirmed as modified, and the cause is remanded for further proceedings consistent with the views expressed herein.
Affirmed as modified; cause remanded.
CLARK and DOOLEY, JJ., took no part in the consideration or decision of this case.