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HUGHES and PITNEY, JJ., dissenting.

reasonable construction consistent with the reservation of the power." Picard v. Tennessee &c. R. R., supra, (p. 641).

I do not find a word in the statutes of Georgia which confers any immunity from the taxing power upon this appellee. The question relates to its interest, not to that of the original companies. What that interest or property may be, and how it is to be assessed, is another question. The first inquiry is whether the appellee has any immunity under the contract clause and that, I submit, is answered, when it is found that it has no contract of its own and no stipulation for a transfer to it of the immunity of others.

The principle which precludes the implication of such a transfer applies equally to leases-even leases for ordinary periods. A lessee is in no better position to claim tax exemptions, or limitations, than a mortgagee, or a purchaser at a foreclosure sale, who under legal authority takes all the property, franchises, and privileges, of the mortgagor. The question as to a leasehold interest was presented in Jetton v. University of the South, 208 U. S. 489. There, the State had granted an exemption to the University of one thousand acres of land. The University gave leases of lots within this tract and thus a village community was developed. An effort was made by the State to tax the property against the University upon the ground that the leases took it out of the exemption. But the state court held otherwise; the property could not be taxed against the University. University of the South v. Skidmore, 87 Tennessee, 155. Thereupon the State, under new legislation authorizing the taxing of leasehold interest, assessed the lessees, and the University with the lessees brought suit in the Federal court to enjoin the collection of the taxes upon the ground of impairment of contract. The Circuit Court entered a decree in favor of the University and enjoined the assessment. On the appeal to this court, it was urged in support of the decree that,

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236 U. S.

in taxing the leased property, the tax was placed upon the only use to which the property could be put in order that it might be made of benefit to the University. Indeed, it was said that the assessment under the legislative act destroyed the value of the exemption; that is, that it was necessary to protect the lessee in order to save the contract right. But this court overruled these contentions. It was thought to be 'plain that an exemption granted to the owner of the land in fee does not extend to an exemption from taxation of an interest in the same land, granted by the owner of the fee to another person as a lessee for a term of years.' The immunity of the one gave no immunity to the other, and the contract of exemption did not imply 'in the most remote degree' that the State would not thereafter 'so change its mode of assessment as to reach the interest of a lessee directly.' The State taxed what it had a right to tax, the lessee's interest, even though it could not tax the University. The exemption, said the court, 'lasts only so long as the university owns the lands, and when it conveys a certain interest in them to a third person it no longer owns that interest, which at once becomes subject to the right of the State to tax it.' In the present case, it may be assumed that, what the appellee has, it has acquired lawfully, but it cannot claim to be immune from taxation or plead the contract of another.

I emphasize this, for it seems to me that its full recognition is important to a proper determination of the case, and that what is denied to the appellee under the contract clause should not be asserted and permitted to have a dominating effect under another name. Nor would there be any basis for an imputation of unfair dealing or sharp practice, in case a State undertakes to tax the property of a company which itself has no immunity from taxation, simply because its grantor had an immunity which it was not able to transfer. The appellee says in

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HUGHES and PITNEY, JJ., dissenting.

its argument that it 'is not claiming any tax exemptions,' and, as in fact it appears to have none, we should deal with the case upon this footing.

What then is the relation of the appellee to the property in question? Its predecessor, the Central Railroad & Banking Company of Georgia, had leased the railroad properties of the Augusta & Savannah and Southwestern companies, respectively, in perpetuity, or during the entire existence of the lessor companies. The property of the Central Railroad & Banking Company of Georgia was sold under foreclosure in 1895, and the appellee was organized as a successor corporation and leases to it of the railroad properties in question were executed by both the original companies 'for the full term of one hundred and one years, and renewable in like periods upon the same terms forever.' The rental in each case was the fixed sum of five per cent. on the amount of the capital stock then outstanding, that is to say, the sum of $51,145 in the case of the Augusta & Savannah Company and $259,555 in the case of the Southwestern Company. In short, under what is termed a lease the appellee took the entire property to hold, if it pleased, in perpetuity, subject to an annual charge of the amounts specified.

Dealing with the substance of things, as we must when the Constitution of the United States is involved-and not with mere forms or names-I am unable to see how an ad valorem tax against the appellee upon the property which it thus holds is a violation of due process of law under the Fourteenth Amendment. Under a system which tolerates such incongruities as the taxing of the entire value of the land to the owner of the equity of redemption, while the interest of the mortgagee is separately taxed, it would seem to be difficult to find ground for a constitutional objection to the treatment of the holder of a perpetual lease as virtual owner. See J. W. Perry Co. v. Norfolk, 220 U. S. 472, 478. In the language of Mr. Chief

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Justice Bleckley in Wells v. Savannah, 87 Georgia, 397, 399 (see 181 U. S. 531, 544, 545): "The value of property consists in its use, and he who owns the use forever, though it be on condition subsequent, is the true owner of the property for the time being. This holds equally of a city lot or of all the land in the world. Where taxation is ad valorem, values are the ultimate objects of taxation, and they to whom the values belong should pay the taxes. Land sold or by a contract of bargain and sale demised forever subject to a perpetual rent, is taxable as corporeal property; and in private hands the rent also is taxable as an incorporeal hereditament. The tax on the former is chargeable to the purchaser or perpetual tenant, and on the latter to the owner of the rent." It can hardly be said that it makes a constitutional difference that a socalled lessee, who may enjoy forever if it chooses, has also the privilege of giving up the property at the renewal dates. Nor do I understand it to be important, under the Federal Constitution, how the interest of the appellee—which in substance is ownership-is technically described. Surely, the Fourteenth Amendment is not concerned with mere technicalities of tenure; these, the State is free to abolish. And it should be added that we do not have here any question of double taxation, as the State has credited to the appellee against the tax demanded the one-half of one per cent., upon the net income, which was payable by the original companies and the payment of which the appellee had assumed.

In considering the constitutional capacity of the State, we are dealing of course with the question as to what it may do by the exercise of all the power it possesses, and not merely with the interpretation of its existing statutes. Castillo v. McConnico, 168 U. S. 674, 683. I recognize fully the difficulties in this case, so far as it has to do with the interpretation and application of the Georgia tax laws. And if it were the decision of the court as a mere matter of

construction of the local law-in the absence of a controlling local decision-that the statutes of Georgia did not justify the assessment actually made, I should withhold this expression of dissent; for that would leave the matter, as I conceive it should be left, within the control of the courts and legislature of the State, so far as the mere imposition of an ad valorem tax upon the property held and enjoyed by the appellee is concerned.

But I am unable to concur in the view that the tax here sought to be collected violates the Constitution of the United States.

I am authorized to say that MR. JUSTICE PITNEY concurs in this dissent.

MR. JUSTICE MCREYNOLDS also dissents.

WRIGHT,

COMPTROLLER

GENERAL

OF

GEORGIA, v. LOUISVILLE AND NASHVILLE RAILROAD COMPANY.

CERTIORARI TO THE CIRCUIT COURT OF APPEALS FOR THE FIFTH CIRCUIT.

No. 162. Argued January 29, 1915.-Decided March 22, 1915.

Wright v. Central Ry. of Georgia, ante, p. 674, followed to effect that under the statutes of Georgia and the leases involved in this action executions for ad valorem taxes on railroads, the owners whereof were exempted by statute from a greater tax than a specified per cent on the income, could not be enforced against those in possession of the railroads as lessees.

The fact that owners of a railroad, who are exempted by statute from paying a greater tax than a specified per cent on the income thereof, lease the entire road to another company does not open the right of the State to tax such lessees on the fee of the property.