Great Northern Railway Co. v. Minnesota

Background

This case is a tax dispute between the State of Minnesota and the Great Northern Railway Company. Minnesota sued to recover the unpaid balance under a 1903 law that required railroads to pay four percent of gross earnings each year instead of other taxes. The railway argued it was entitled to a three percent rate under an 1857 territorial charter that it said created a perpetual contract. The Minnesota courts split on the issue, and the State’s higher award was appealed to the Supreme Court.

Reasoning

The central question was whether the 1857 territorial act created an irrevocable contract that protected the three percent tax rate for the railroad and its successors. The Court explained that the State bought the railroad property at foreclosure in 1860 and that the state constitution, adopted in 1858, required equal and uniform taxation and prevented such exemptions from being renewed or transferred in ways inconsistent with the constitution. The Court concluded the asserted perpetual three percent contract could not bind the State and did not prevent Minnesota from applying the later four percent law. The Court also said the record did not show the 1903 rate was confiscatory under due process.

Real world impact

The decision allows Minnesota to collect the higher four percent gross-earnings tax from the railway and rejects the company’s claim to a perpetual territorial exemption. It limits the ability of a successor corporation to insist on old charter exemptions after state foreclosure, reconveyance, consolidation, or changes required by a state constitution. The Court left state-law questions about the 1903 act’s authorization to the state courts, but affirmed the judgment awarding the State the additional tax.