ation. It was also conceded that at the time this act was passed there was no provision in the Constitution of the state of Maryland restricting the legislative power to exempt, and that no reservation of the power to repeal, alter, or amend was found in the Constitution of the state, or expressed or implied in the charter in question. In 1854 an act was passed by the Maryland legislature, designated as chapter 250 of the laws of that year. The title of this act was as follows:

"An Act to Authorize the Consolidation of the Baltimore and Susquehanna Railroad Company with the York and Maryland Line Railroad Company, the York and Cumberland Railroad Company and the Susque hanna Railroad Company, by the Name of the Northern Central Railway Company."

from time to time to establish its capital stock at an amount not exceeding eight millions of dollars, the same to be represented by such number of shares, and the said consolidated company shall have power to issue their bonds convertible into stock on such terms as the company may prescribe, and to secure the same by one or more mortgages for any such amounts as they may find necessary for paying off any existing debt of the company.

ture of the state of Pennsylvania, touching the name of said corporation, and of the board of president and directors in said consolidated company, and the conditions relating to their appointments."

After providing for a board of directors and officers of the new or consolidated company, the act proceeded to say: "That the company shall make and use a common seal, and possess all the corporate powers and privileges, and be subject to all the duties and obligations not inconsistent with this act, and its general intent, which are exThe companies referred to in this title pressed in the charter heretofore granted to other than the Baltimore & Susquehanna the said Baltimore & Susquehanna Railroad . Railroad were corporations owing their ex- Company, and its supplements: Provided, istence to charters granted by the legislature that this clause shall not be construed to of Pennsylvania, and which were operating deprive the parties to the said consolidated railroads in that state connecting with the company of the right or authority to make Baltimore & Susquehanna. The effect of the such provisions and regulations, notwithconsolidation was to create one corporation standing said original charter and its supowning and operating one line of railroad plements, as may be necessary to create and from and across the state of Maryland into establish said consolidated company, and and across the state of Pennsylvania. The bring its organization into agreement and act of 1854 authorizing the consolidation, consistency with the terms and conditions the title of which has just been stated, by of the charter of the several companies of its first section empowered the stockholders which the said consolidated company shall of the Baltimore & Susquehanna Railroad, be composed: And provided also, That they upon their acceptance of the act, "to unite parties to the consolidated company shall and to consolidate their company or corpo- be authorized and empowered to adopt and ration with the York & Maryland Line Rail- conform the organization of the said conroad, the York & Cumberland Railroad Com- solidated company to such provisions or enpany and the Susquehanna Railroad Com-actments as may be required by the legisla pany of the state of Pennsylvania, so as to form and constitute one company or corporation, to be called the Northern Central Railway Company, on such terms and conditions, and conformably to such agreements and regulations, as the said several companies shall respectively determine and adopt, subject, nevertheless, to the following general provisions: First, that all existing contracts, engagements, and liabilities of the said Baltimore & Susquehanna Railroad Company shall continue to bind said company and its property as fully as before the consolidation herein above authorized, or that the said existing contracts, engage In pursuance of the authority thus conments, and liabilities shall be duly adopted ferred upon the Maryland corporation, and and assumed by the consolidated company in virtue of power granted by the legislature except as herein expressly altered or re- of Pennsylvania to the three Pennsylvania scinded; second, that all laws heretofore corporations, the consolidation was effected, made in reference to the said Baltimore & new stock was issued, and a company came Susquehanna Railroad Company and not re-into being known as the Northern Central pealed or modified by the legislature of Mary- Railway Company, whose affairs were manland, and all ordinances relating to said com-aged by the new board of directors and offipany heretofore made and not repealed by the mayor and said council of Maryland, shall be binding and operative upon the said consolidated company, so far as its property or its operations may be within the jurisdiction of the state of Maryland or the city of Baltimore respectively, and so far as the laws or ordinances may be applicable to and consistent with the new oganization of the said consolidated company; third, that the consolidated company shall have power

The 2d section of the act, among other things, provided that "this act shall take effect whenever and as soon as the said parties hereinbefore referred to shall have agreed to consolidate their several companies into one, and shall have settled, determined, and agreed upon the terms and conditions of such consolidation in conformity with the provisions of this act.

"

Al

cers elected or appointed pursuant to the new charter. The corporation, in availing itself of the provisions of the law of 1854, executed articles of consolidation. though the act of 1854 only provided that the new corporation should have the corporate "powers and privileges" of the constituent bodies, it is stated in argument that the articles of consolidation executed under the law purported to vest the new corporation with, not only the right to the prop

erty rights and privileges of the old com- the exemption from taxation had been repanies, but also with their immunities. In pealed. 44 Md. 162. 1854, at the time the act of consolidation was passed, the Maryland Constitution (of 1850) was in force, and provided in § 47, article 3, as follows:

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franchises and property of every descrip- thority of this statute a tax of 1 per cent tion and gross receipts of said Northern was levied by the state in each of the years Central Railway Company within the state 1891 to 1895, both inclusive, upon the gross of Maryland, shall be subject to taxation for receipts of the Northern Central Railway state purposes to the extent of an annual Company for the year preceding, and these tax of one half of one per cent upon the taxes were paid by the company under progross receipts from its railroad and fran- test. Upon demand, however, being made in chise lying within the state of Maryland, 1896 for payment of the tax of 1 per cent and from all other sources within this state, upon the gross receipts for the year 1895, and said franchises, property, and gross re- compliance was refused. A tender by the ceipts shall not be subject to any other tax company of the taxes, calculated at the rate under the laws of the state of Maryland; of 1/2 of 1 per cent, was refused by the state, The act further provided for the and the present action was thereupon payment of a designated sum by the railroad brought to recover the taxes thus asserted company for past taxes, declared said pay- to be due and payable under the act of 1890. ment should acquit such taxes, and directed The company defended on the ground that the discontinuance of all suits pending the act of 1880 was a contract protecting it against the company for such taxes. It from a higher rate of tax on its gross rewas, however, provided that its provisions ceipts than in that act specified; that the should not be operative until the payment act had not been repealed; that if repealed which the act required had been made and the repealing statute was void, because it until the acceptance of the provisions of the impaired the obligations of the contract react by the stockholders of the company. The sulting from the act of 1880. There was act was accepted, the money was paid and judgment in favor of the corporation. The the suits were discontinued. At the time case was taken to the court of appeals of of the passage of this act of 1880 the Con- the state of Maryland and the judgment was stitution of Maryland of 1867 was in force, reversed, the court holding that the provi. and therein it was provided (art. 3, § 48): sions of the act of 1880 had been repealed "Corporations may be formed under gen- by state statutes to which it referred, and eral laws but shall not be created by that the repeal did not violate the Constispecial act, except for municipal purposes tution of the United States by impairing the and except in cases where no general obligations of the contract, as asserted by laws exist providing for the creation of cor- the company, because the corporation held porations of the same general character as its rights subject to the power to repeal, althe corporation proposed to be created, and ter, and amend, as reserved in the Constituany act of incorporation passed in violation tion at the time both the acts of 1854 and of this act shall be void. All char- 1880 were passed. 90 Md. 449, 45 Atl. 465. ters granted or adopted in pursuance of this The case was remanded for a new trial. It section, and all charters heretofore granted was again tried, the Federal defense of the and created, subject to repeal or modifica-impairment of the obligation of the contract tion, may be altered from time to time, or be repealed." In accordance with the act of 1880 the company year by year paid the tax on its gross receipts

In 1890 the state of Maryland passed a general law entitled "An Act to Provide for State Taxation on the Revenues of Railroad, Telegraph, or Cable, Express or Transportation, Telephone, Parlor Car, Sleeping Car, Safe Deposit, Trust, Guaranty, Fidelity, Oil or Pipe Line, Title, Insurance, Electric Light or Electric Construction Companies Incorporated Under Any General or Special Law of This State and Doing Business Therein." [Md. Laws, chap. 559.] By this act a tax of 1 per cent was imposed upon the gross receipts "of all railroad companies worked by steam incorporated by or under the authority of this state and doing business therein." Under the asserted authority of said state of Maryland, and claiming that under said acts the gross receipts of said Northern Central Railway Company are Пable to said tax, have instituted suits to recover the same.

And whereas, the property of sald company has been also assessed as liable to taxation for county and municipal purposes.

And whereas, the said company has the right to have the question at issue between it and the state of Maryland carried to the Supreme Court of the United States to be there decided. And whereas, it has been represented to this 23 S. C.-5.

was again specially urged, the case was decided against the corporation, was taken again to the supreme court of the state of Maryland. That court, adhering to its former view, affirmed the judgment. It is to this judgment that the present writ of error is prosecuted. 51 Atl. Î108.

Mr. Bernard Carter for plaintiff in er

ror.

Messrs. Louis E. McComas and George R. Gaither for defendant in error.

Mr. Justice White, after making the foregoing statement of the case, delivered the opinion of the court:

In order to confine the controversy arising on this record to the propositions upon which its decision must really rest to eliminate the questions discussed at bar, which general assembly that what would be the ultimate decision of said question is a matter of great doubt, and it is deemed to be, moreover, just and proper that an equitable settlement should be made of the matters so in controversy, and it having been represented to this general assembly that the said Northern Central Railway Company, for the purpose of making such settlement, is willing to pay a tax of one half of one per centum on the gross re ceipts within this state, upon the terms and conditions hereinafter set forth; now, therefore

266

are either irrelevant or so effectually fore- | contract with an irrepealable right forbidclosed by prior decisions of this court as to den by the constitution. If one of the conbe no longer open to controversy, the follow-stituent elements of the corporation posing propositions are stated:

sessed, prior to the formation of the new corporation, such right, and under the assumption that the right itself passed to the new body, it loses its irrepealable character, because the new corporation is subject by the very law of its being to the provision of the constitution forbidding irrepealable

no longer open to discussion. The whole subject has been so recently fully reviewed and restated, it is sufficient to refer to that case: Yazoo & M. Valley R. Co. v. Adams, 180 U. S. 1, 17, 45 L. ed. 395, 405, 21 Sup. Ct. Rep. 240 et seq., and authorities there cited.

Coming to apply the principles just stated to the case before us, it is apparent that unless there is something peculiar in this case which takes it from under the control of the doctrine referred to, that the court below correctly held that the new corporation created by the act of 1854 had no irrepealable contract exempting it from taxation either as the result of the act of 1854 or of the act of 1880. The positive prohibition existing in the Constitution of the state against irrepealable charter grants, both when the act of 1854 and the act of 1880 were passed, renders any other conclusion impossible. But it is insisted that, as the Constitution of 1867, which was in force when the law of 1880 was enacted, reserved the right to repeal, alter, or amend only charters granted or adopted, the act of 1880 did not come within the right to repeal or amend because it was not a charter, but a contract entered into between the state and the corporation. True, the act of 1880 was put, not in the form of a charter amendment, but in that of a contract. The lower court, after quot ing from the opinion rendered by it, when the case was before it under the act of 1854 (44 Md. 162) said:

First. Where a contract is claimed to arise from a state law, and it is held below that a subsequent statute has repealed the alleged contract, and effect is thereby given to the subsequent law, the mere question whether the alleged contract has been repealed by the subsequent law is a state, and grants. not a Federal, question. In such a case The doctrine as just stated has been so this court concerns itself, not with the ques-frequently declared by this court that it is tion whether the state law, from which the contract is asserted to have arisen, has been repealed, but proceeds to determine whether the repeal was void because it produced an impairment of the obligations of the contract within the purview of the Constitution of the United States. In other words, where the state court has given effect to a subsequent law, this court decides whether such effect, so given by the state court, violates the Constitution of the United States. Gulf & 8. I. R. Co. v. Hewes, 183 U. S. 66, 46 L. ed. 86, 22 Sup. Ct. Rep. 26. We therefore put out of view the question whether the acts of 1854 or of 1880 were repealed by the subsequent state statutes as held by the court below, and, treating such repeal as an accomplished fact, shall determine whether the repealing acts were void because impairing the obligations of the contract relied upon, in violation of the Constitution of the United States. In considering this question, it will be borne in mind that it is elementary that where the constitution of a state reserves the right to repeal, alter, or amend, all charters granted by the legislature are subject to such provision, and therefore are wanting in that attribute of irrevocability which is essential to bring them within the intendment of the clause of the Constitution of the United States protecting contracts from impairment. The cases supporting this doctrine are so numerous that they need not be cited. We content ourselves, therefore, by referring to one of them: Citizens' Sav. Bank v. Owensboro, 173 U. S. 636, 641, 43 L. ed. 840, 842, 19 Sup. Ct. Rep. 530. It is, moreover, conclusively determined that where the constitu-emption from taxation upon the form or tion of a state reserves the power to repeal, alter, or amend a charter, such provision is applicable to the charter of a consolidated corporation where, as the result of the consolidation, a new corporation takes being, new stock is provided for, new franchises are conferred, and new officers appointed. In other words, that where a legislature is inhibited by the constitution from making an irrepealable charter it cannot create a new contract and bring into being a new corporation, and yet by the charter of such cor poration give rise to the irrepealable contract which the constitution absolutely prohibits. To state the doctrine in another form, it is this: That where a new corporation is chartered, subject to a constitution which forbids the granting of an irrepealable right, such new corporation cannot become endowed by the effect of a legislative

"It is to be observed that the court does not rest the inability of the legislature to grant to a corporation an irrepealable ex

character of the particular statute then under consideration, but puts it upon the broad ground of the want of power in the legisla ture under the Constitution to make such a grant at all. The court certainly in effect determines that any form of law which grants to a corporation such a corporate privilege as immunity from taxation is one passed pursuant to the section of the Constitution referred to, and is therefore subject to alteration or repeal by future legislatures."

Without pausing to consider whether, as contended, the rule as thus announced may have been in some respects too broadly stat ed, we think it clear that the mere form adopted by a legislature in conferring a right on a corporation cannot be controlling, for if it were so the provision of the Constitution, instead of being commanding and

269

$270

prohibitive, would merely be precatory or advisory. We are also clearly of the opinion that the act of 1880, in its essential nature and effect, in whatever form couched, was intended to be and necessarily operated as an amendment to the charter of the company created by the act of 1854. Such being its essential nature and necessary effect, we think it plainly came within the provisions of the Constitution of 1867, and was therefore subject to repeal, alteration, or amendment.

mous.

ter; we are concerned alone with the ques-
tion of power, and on passing on such ques-
tion cannot hold that an act which by the
very terms of the state Constitution was
made repealable, nevertheless engendered an
irrepealable contract protected from impair-
ment by the Constitution of the United
States.
Affirmed.

(187 U. S. 165) METCALF BROTHERS & COMPANY, Petitioners,

v.

BENJAMIN BARKER, JR., Trustee in
Bankruptcy of Lesser Brothers.

Bankruptcy act - four months' clause-
judgment enforcing pre-existing lien-
jurisdiction of court of bankruptcy-in
terference with state court.

1.

Judgment creditors of a bankrupt by commencing a judgment creditors' action more than four months before the petition in bankruptcy is filed acquire a lien on the property of the bankrupt, of which they are not deprived by the bankruptcy act of July 1, 1898, 87,1 because the judgment enforcing the lien is recovered less than four months prior to the filing of such petition, although by that section all judgments obtained against a bankrupt within that period are avoided, as this provision must be regarded as referring only to judgments creating liens, and not to judgments which enforce an otherwise valld pre-existing llen. 2. A court of bankruptcy is without jurisdiction to enjoin further proceedings under the judgment of a state court in a judgment creditors' action commenced before the passage of the bankruptcy act, which set aside as fraudulent certain transfers of property made by the bankrupt, and directed the payment of the amount of the judgments out of the proceeds of a sale of the judgment debtor's property under an order of the state court.

It is strenuously, however, insisted that this case should not be controlled by the reasons previously stated because of the following considerations: The decision of the court of appeals of Maryland under the act of 1854 (44 Md.), it is urged, was not unaniThere was an elaborate dissent. For this reason, and because the case was open to review in this court on the question of the impairment of the obligations of the contract, it is said there was necessarily grave doubt as to the rights of the parties. In view of the foregoing conditions and of such doubt, the act of 1880 embodied but an honest effort by way of contract and compromise to close the doubtful controversy in the interest of both parties, the state on the one hand and the corporation on the other; hence the act of 1880 was*not subject to repeal, alteration, or amendment. Conceding, arguendo, the premise upon which the above deduction is based, the conclusion itself is devoid of foundation. It but reiterates in another mode of statement the argument that the form in which a contract is couched, and not its substance and necessary effect, is the criterion by which to ascertain whether it is controlled by the constitutional provision forbidding irrepealable contracts. Moreover, it disregards the elementary principle that the power to grant an irrepealable right by a compromise agreement depended on the existence of the authority to make such grant by original action. The power to compromise on the subject was as limited as the power to contract originally. District of Columbia v. Bailey (1897) 171 U. S. 161, 43 L. ed. 118, 18 Sup. Ct. Rep. Argued October 30, 1902. 868. Indeed, the entire argument upon this branch of the case, reiterated in many forms, amounts but to the contention, when O`States Circuit Court of Appeals for the ultimately considered, that because the act of 1880 is asserted to have been enacted with Second Circuit presenting the question the view of settling what was honestly whether a judgment enforcing a pre-existdeemed to be a pending and serious contro- ing lien was valid, though rendered within versy, it was unwise, and it may be unjust four months prior to bankruptcy proceedto repeal it. Pretermitting the infirmity in ings against the judgment debtor, and the the proposition which naturally is suggested had jurisdiction to interfere with pending question whether the court in bankruptcy by the fact that shortly after the decision in 44 Md. this court decided that the pos- respectively in the affirmative and negative. proceedings in the state court. Answered session of the rights and privileges of a former corporation did not endow a new corporation with an exemption from taxation enjoyed by the old (Morgan v. Louisiana [1876] 93 U. S. 217, 23 L. ed. 860), and putting out of view the other cases to the same effect, decided by this court prior to 1880, the proposition is untenable. It but invokes reasons of expediency or policy. Into these considerations we may not en

[No. 57.]

ber 1, 1902.

Decided Decem

A CERTIFICATE from the United

Statement by Mr. Chief Justice Fuller: The certificate in this case is as follows: "This matter came before this court upon a petition of Metcalf Brothers & Co. to superintend and revise in matter of law certain proceedings of the district court of the United States for the southern district of New York, wherein an order was made by said district court enjoining the petitioners, 1 U. S. Comp. St. 1901, p. 3450.