Statement of the case.

counties, sixty-three miles; making a total of one hundred and seventy-six miles.

In this state of things, one Peniston, Treasurer of Lincoln County, being about to collect the tax laid, the Union Pacific Railroad Company filed a bill in the Circuit Court of the United States in the District of Nebraska against him, to restrain his doing so; assigning as grounds for the bill among others—

That the State of Nebraska had no power to subject to taxation for State purposes the road-bed, rolling-stock, and other property necessary for the use and operation of the road; such power resting, as it was asserted by the bill, exclusively in the government of the United States.

That Lincoln County was not by law authorized to tax any portion of the road-bed or property of the company, except such as was situate within its geographical limits.

The cause was heard upon pleadings and agreed proofs, and the Circuit Court refused to restrain the collection of the tax against the one hundred and seventy-six miles of the road, holding the same to have been lawfully imposed, and the property of the company to be open to State taxation. Upon this decree being brought here by the present appeal, the following errors were assigned:

First. That it was error to hold the tax a valid imposition upon the property of the Union Pacific Railroad Company subjected to it, such property being exempt from State taxation, by virtue of the incorporation of the company by the United States as a means for the performance of certain public duties of the government, enjoined and authorized by the Constitution.

Second. That it was error to hold the rating and taxing of the property of the company, outside the county of Lincoln, by the authorities of that county, valid and lawful under the legislation of the State.

Mr. W. M. Evarts, for the appellant:

I. The tax and the statute of Nebraska, so far as it au

Argument against the tax.

thorized the tax, were void, and the company's property should have been relieved, and protected therefrom by the judgment of the court.

1. The railroad company was created and endowed by Congress, with its franchises, powers, and property, as a meaus, instrument, and agency for the execution of the powers vested in the General government by the Constitution of the United States.

2. At the time of the passage of the act of Congress, under which the corporate powers were created and conferred, the government of the United States exercised the sole and undivided dominion over the territories to be traversed by the railroad, or affected by the powers of this corporation or their administration.

3. The tax here authorized by the statute of Nebraska, and actually laid by the county of Lincoln, is rated and assessed upon whatever constitutes the property and the means of the company as collected, combined, prepared, and worked (under or by authority of the act of Congress) as the instrument and agent of the General government, for the execution of its constitutional powers and the performance. of its constitutional duties, so far as this instrument and agent has its structure, capital in any and every form of use or investment, and its operations within the local range of the taxing power.

The theory of the taxation is an apportionment of the total and aggregated means of the corporation per mile of its railroad, and a valuation and taxation of the ratable share of the length of the railroad found within the different counties of the State.

4. If the tax be looked at in its circumstances as well as in its principle, it is not too much to say that the introduction and operation of this means and agency of the General government within the territorial limits of what now constitutes the State of Nebraska, is made the occasion, and the means and agent made the subject, of taxation for local and general State purposes, in exoneration of the property of the population which should bear those burdens

Argument against the tax.

II. The settled doctrines of this court, in expounding the relations which the means, instruments and agencies, created by the General government for the execution of its constitutional powers bear to the States, and taxation under the authority of the States, exempt the Union Pacific Railroad Company from the taxation to which it is sought to be subjected.

The principles established in the celebrated cases of Mc Culloch v. Maryland,* and Osborn v. Bank of United States,† stand unbroken and impregnable. Neither the force of their reason, nor the weight of their anthority, is, in the least, abated by any subsequent adjudications in pari materia.

The late Chief Justice Chase thus speaks of these decisions:

"That Congress may constitutionally organize or constitute agencies for carrying into effect the National powers granted by the Constitution; that the agencies may be organized by the voluntary association of individuals, sanctioned by Congress; that Congress may give to such agencies, so organized, corporate unity, permanence, and efficiency; and that such agencies in their being, capital, franchises, and operations, are not subject to the taxing power of the States, have ever been regarded, since those decisions, as settled doctrines of this court.

"Those decisions were the judgments of great men and of great judges. They were pronounced by the most illustrious of their number, and are distinguished by his peculiar clearness and cogency of reasoning. For nearly half a century the principles vindicated by them have borne the keen scrutiny of an enlightened profession and the sharp criticism of able statesmen, and they remain unshaken. All the judges who concurred in them have descended long since into honored graves, but their judgments endure, and gathering vigor from time and general consent, have acquired almost the force of constitutional sanctions."

A concise and authoritative statement of what principles were decided in Mc Culloch v. Maryland, and Osborn v. Bank

* 4 Wheaton, 316.

‡ Van Allen v. The Assessors, 3 Wallace, 591.

† 9 Id. 738.

Argument in support of the tax.

of the United States, is given by this court in its opinion, as delivered by Marshall, C. J., in Weston v. Charleston.*

"We will not repeat the reasoning which conducted us to the conclusion thus formed; but that conclusion was, that all subjects to which the sovereign power of a State extends, are objects of taxation; but those over which it does not extend, are, upon the soundest principles, exempt from taxation.

"The sovereignty of a State extends to everything which exists by its own authority, or is introduced by its permission;' but not to those means which are employed by Congress to carry into execution powers conferred on that body by the people of the United States.

"The attempt to use the power of taxation on the means employed by the government of the Union in pursuance of the Constitution, is in itself an abuse, because it is the usurpation of a power which the people of a single State cannot give.

"The States have no power by taxation, or otherwise, to retard, impede, burden, or in any manner control the operation of the constitutional laws enacted by Congress, to carry into execution the powers vested in the General government."

III. But, if the State act be constitutional, in its application to the property of this company subjected to it, it is submitted that the property outside of the county of Lincoln is not lawfully taxable by the authorities of that county under the laws of the State.

Mr. J. M. Woolworth, contra:

The main objection to these taxes is, that they are imposed upon an agent of the Federal government. The objection cannot be supported as an original proposition. We concede that those agencies which Congress has established for the purpose of carrying into execution the powers conferred in the Federal Constitution, are in no way liable to interference by the States. This court has reiterated that principle many times, and with great emphasis. But there is another principle which this court has as often and as emphatically asserted, and which is equally necessary to the

* 2 Peters, 466.

Argument in support of the tax.

harmonious relations of the State and Federal powers. It is, that the taxing power exists in the States unrestricted by the Federal Constitution or government, except as to the means necessary to the latter to discharge its functions.

This matter received full exposition from this court (Chase, C. J., speaking for it), in Lane County v. Oregon.*

These two principles are fundamental in our complex system:

1. The taxing power of a State extends to every matter of value within its sovereignty.

2. But that power cannot reach those agencies which are employed by Congress to carry into execution, the powers conferred in the Federal Constitution.

These principles are coefficient. By the one, the just and necessary powers of the States, by the other the just and necessary powers of the Nation are preserved. But they are not co-ordinate. The first is the rule, the second the exception thereto. It devolves upon those who would withdraw "any property, business, or persons, within their respective limits, from the taxing power of the States," to show the same to be within the exception.

But there are many agencies of the Federal government which do not enjoy any exemption whatever from taxation by the States. They do not claim such exemption, even in respect of property which they use when serving the gov

ernment.

The steamship on the ocean, which bears the ambassador to a foreign court, and the dispatches by which the diplomatic intercourse of the nation is guided, are agents of the government, and discharge most necessary, valuable, and efficient service. The railroad companies, in every one of whose trains is a postal car, bearing the orders of the executive to subordinate officers scattered all through the wide country, and by which the domestic policy and operations of the government are directed, are its agents, also dis

* 7 Wallace, 71; and see the previous cases of Nathan v. Louisiana, 8 Howard, 73; Hamilton Company v. Massachusetts, 6 Wallace, 632.