Syllabus.

position where he must be presumed to have a substantial, although not direct interest in the result of the litigation. Though it was allowable when so situated to file a bill in the nature of a bill of interpleader, (Bedell v. Hoffman, supra,) we think it clear that his ultimate interest prevents him from being allowed his solicitor's fee from the fund dedicated to the payment of the mortgage, thereby diminishing the security of the mortgage creditor.

The decree is reversed, and a decree is rendered in favor of Martha Groves and William J. Groves, directing the payment out of the fund of $4873, with interest at eight per cent from March 5, 1884, until paid, and costs of this and the court below. Reversed.

MR. JUSTICE JACKSON, not having been present at the arguinent, took no part in the decision of this case.

MOBILE AND OHIO

RAILROAD COMPANY V.

TENNESSEE.

ERROR TO THE SUPREME COURT OF THE STATE OF TENNESSEE.

No. 1004. Argued April 24, 1894. — Decided May 14, 1894.

This court has jurisdiction to revise the judgment of the Supreme Court of Tennessee in this case, deciding that the provision in the eleventh section of the Tennessee charter of the Mobile and Ohio Railroad Company that no tax shall ever be laid on said road or its fixtures which shall reduce the dividends below eight per cent does not forbid the assessment and collection of taxes under the acts of the legislature of Tennessee referred to in the opinion of that court; that "the said eight per cent clause is invalid," " null and void," and that the said legislation does not violate or impair the obligation of any contract with the Mobile and Ohio Company."

In 1848 the legislature of Tennessee had, under the constitution of the State of 1834, then in force, power to grant to the Mobile and Ohio Railroad Company the exemption from taxation which was granted to it by the eleventh section of the act of January 28, 1848, incorporating it in Tennessee, in the following terms: "That the capital stock of said company shall be forever exempt from taxation, and the road, with all its fixtures

Opinion of the Court.

and appurtenances, including workshops, warehouses, and vehicles of transportation, shall be exempt from taxation for the period of twentyfive years from the completion of the road, and no tax shall ever be laid on said road or its fixtures which will reduce the dividends below eight per cent."

Under the provisions of that section the capital stock of the company is forever exempt from taxation during the existence of the corporation; the road, fixtures, etc., were exempt for twenty-five years after the completion of the road, which term has now expired; and now they can be taxed only when the net earnings of the road are more than sufficient to pay to the stockholders, on the present basis of its capital, a dividend of eight per cent a year.

Dividends can rightfully be paid only out of profits; profits are measured by the amount of net earnings; and net earnings are what remain after maintaining the property and paying the interest upon its debts.

In sustaining the validity of the exemption, the court must not be understood as holding that the railroad company has the right, in its discretion, to issue hereafter additional capital stock, or to increase its bonded indebtedness, even for legitimate purposes, and have the same taken into consideration upon the question of its liability for taxation under the eight per cent dividend clause of its charter.

THE case is stated in the opinion.

Mr. E. J. Phelps and Mr. F. W. Whitridge, (with whom was Mr. E. L. Russell on the brief,) for plaintiff in error.

Mr. G. W. Pickle, Attorney General of Tennessee, Mr. M. M. Neil, and Mr. J. M. Troutt for defendants in error. Mr. F. W. Moore, Mr. John E. Wells, Mr. S. A. Champion, Mr. J. R. Deason, Mr. E. L. Bullock, Mr. A. W. Stovall, and Mr. James M. Head were with them on their briefs.

MR. JUSTICE JACKSON delivered the opinion of the court.

The Federal question presented by the writ of error in this case is whether state statutes, subjecting the property of a railroad corporation to taxation, impair the obligation of the contract contained in an exemption clause of the company's charter?

It arises in this way: The State of Tennessee and certain counties therein in February, 1891, filed their bill against the

Opinion of the Court.

Mobile and Ohio Railroad Company, (hereafter styled the railroad company,) and its mortgagee, the Farmers' Loan and Trust Company, to enforce the collection of state and county taxes, assessed upon the property, roadbed, and fixtures of the railroad company for the years 1885 to 1889 inclusive. The defence specially interposed, and which raises the Federal question in the case, was that the revenue statutes of the State, enacted subsequent to the granting of the charter, and under which the taxes sought to be collected were levied, impaired the obligation of the contract contained in the railroad company's charter, and were therefore unconstitutional and void.

The railroad company was chartered by an act of the legis lature of the State of Tennessee, approved January 28, 1848. The State in granting the charter reserved no right to amend or repeal the same; nor was there any provision either in the constitution or the general laws of the State-in existence at the time which reserved to the State the right to alter, modify, or repeal the charter. By section 11 of the act of incorporation it was provided: "That the capital stock of said company shall be forever exempt from taxation, and the road, with all its fixtures and appurtenances, including workshops, warehouses, and vehicles of transportation, shall be exempt from taxation for the period of twenty-five years from the completion of the road, and no tax shall ever be laid on said road or its fixtures which will reduce the dividends below eight per cent."

Various grounds were alleged in the bill on which the effect of section 11 was sought to be avoided, or to show that the railroad company had waived or forfeited the benefits of the exemption contained in the last clause thereof. These allegations need not, however, be noticed, as they were found and adjudged by the Supreme Court of Tennessee against the complainants, and in favor of the railroad company. The pleadings admitted and the proofs established that since the completion of the road to its original northern terminus on the Mississippi River, in April, 1861, the railroad company had neither earned nor declared any dividend, either on its whole

Opinion of the Court.

line or upon any portion of its road lying in the State of Tennessee. It is also shown that its earnings for the years 1885 to 1889, inclusive, were insufficient to pay any dividend to its stockholders.

The period of twenty-five years from the completion of the road, referred to in the section, having expired on April 22, 1886, the Supreme Court of the State disallowed the taxes assessed and claimed for the years 1885 and 1886, on the ground that they were covered by the twenty-five year exemp tion, but adjudged and decreed that the railroad company was liable to the respective complainants for the taxes of 1887, 1888, and 1889, in the following amounts: to the State of Tennessee, $24,117.73; to McNairy County, $16,365.52; to Madison County, $13,769.69; to Chester County, $4210.25; to Obion County, $10,554.61; to Gibson County, $19,182.06; which sums were declared liens upon the property of the railroad company.

The grounds upon which its decree was based, and which are assigned for error, are as follows:

"And the court, construing said 11th section of said Tennessee charter, is further of opinion, and doth so adjudge and decree, that the true intent and meaning of the said 11th section of the Tennessee charter of the Mobile and Ohio Railroad Company, passed January 28th, 1848, is that on and after the 22d day of April, 1886, being twenty-five years from the completion of said road, the road, with all its fixtures and appurtenances, including workshops, warehouses, and vehicles of transportation, all the property, franchise, etc., of the said Mobile and Ohio Railroad Company, became liable to taxation; and the court is further of opinion, and doth accordingly so adjudge and decree, that from and after said 22d day of April, 1886, all of said properties of every description of the said Mobile and Ohio Railroad Company - that is to say, its roadbed and fixtures and appurtenances, including workshops, warehouses, vehicles of transportation, and all of its property of every kind and description and franchises, become liable to taxation under the rule of equality and uniformity prescribed in article 2, section 28, of the constitution of 1834 of the

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6

State of Tennessee; and it further appearing to the court that the complainants have in their bill in this cause attacked the eight per cent clause in the said section (11) eleven of the said charter of the said Mobile and Ohio Railroad Company, passed by the legislature of Tennessee on January 28th, 1848, which eight per cent clause reads as follows: And no tax shall ever be laid on said road or its fixtures which will reduce the dividends below eight per cent,' and that they have charged in their said bill, among other things, that said eight per cent clause is in violation of the rule of equality and uniformity of taxation prescribed by said article 2, section 28, of said constitution of 1834, and the court being of opinion that said property became taxable as aforesaid on and after April 22, 1886, therefore the court doth adjudge and decree that the said eight per cent clause is in violation of said article 2, section 28, of said constitution of 1834, as aforesaid, and that the same is unconstitutional and void, which said article 2, section 28, of the said constitution of 1834 provides, among other things, that all property shall be taxed according to its value, that value to be ascertained in such manner as the legislature shall direct, so that the same shall be equal and uniform throughout the State. No one species of property from which a tax may be collected shall be taxed higher than any other species of property of equal value;' and the court is also of opinion, and doth accordingly so adjudge and decree, that said eight per cent clause is likewise void because it is so vague, indefinite, and uncertain in its terms as to be nonenforceable in this, to wit, that it does not appear from said clause or anywhere in said charter upon what dividends were expected to be declared, there being no amount or limit of capital stock fixed in said charter, and no means for fixing the same being provided, and no directions being given or means provided as to how said dividends should be ascertained, with a view to taxation or otherwise, and the court is of opinion, and doth accordingly so adjudge and decree, that said eight per cent clause is arbitrary, insensate, and absurd, and is void and unenforceable, and furnishes no obstacle whatever to the taxation of said properties.