New York Ex Rel. Troy Union Railroad v. Mealy

Background

A railroad company formed a terminal company in the 1850s with $30,000 in capital stock. The City of Troy agreed to support a law saying the company’s property would be taxed only at its capital stock amount, and the New York Legislature passed that law in 1853. Later the parties reworked their agreements after a default on city-issued bonds, and decades later the state repealed the 1853 exemption. The railroad then faced a much larger tax valuation and challenged the repeal as impairing its alleged contract rights.

Reasoning

The core question was whether the 1853 statutory exemption was an irrevocable contract right or a revocable concession that the Legislature could repeal. The New York courts found the exemption to be a spontaneous favor that could be revoked, noting the 1858 reworking of the arrangements and the state constitution’s allowance for altering such laws. The Supreme Court of the United States affirmed the state courts’ judgment, accepting that the statute embodied a revocable concession rather than an unchangeable contractual immunity. The Court also noted that a separate city promise to refund taxes above $30,000 was not before it.

Real world impact

The ruling means the railroad cannot insist on a forever-fixed $30,000 tax valuation based on the 1853 law; the city may assess and tax property above that amount after repeal. The decision is limited to the question whether the statute itself was an unchangeable contract, and it does not resolve other possible refund claims against the city.