ERROR TO THE COURT OF CHANCERY OF FRANKLIN COUNTY IN THE STATE OF VERMONT.
MR. JUSTICE GRAY, after stating the case, delivered the opinion of the court.
It was hardly denied at the bar, that the first writ of error was prematurely sued out, before a final decree had been entered. But it is unnecessary to dwell upon that, because in other respects the questions arising upon the two writs of error are identical.
The decree below, as appears by the mandate of the Supreme Court of Vermont, and still more clearly by its opinion, made part of the record, and reported in 63 Vermont, 1, did not proceed exclusively on the decision of a Federal question, but also upon grounds of general law.
The conclusion of that court, following the decision of this court in Philadelphia Steamship Co. v. Pennsylvania, 122 U.S. 326, that the statute of Vermont of 1882, so far as it sought to tax the earnings derived from interstate commerce, was unconstitutional, was in favor of the Rutland Railroad
Company, and therefore cannot be questioned on a writ of error sued out by that company.
The court did declare that the provision of the statute, which requires the lessee to pay the tax and deduct the amount from the rent, does not impair the obligation of a contract, because both railroad companies, as well as the rent due from the one to the other, were proper subjects for taxation under the laws of Vermont, and the method to be adopted for the collection of the tax was purely a question of legislative discretion.
But the decision of this part of the case (the only part decided against the plaintiff in error) was not put upon that consideration alone. On the contrary, the court went on to say: "But it by no means follows, because the defendant has paid to the State taxes, under a law afterwards held to be void, by withholding the amount thereof from the rent, that the Rutland Company can now claim the balance of the rent for this reason." And this proposition was rested on several distinct grounds.
The first of these grounds, as summed up by the state court, was as follows: "Down to May 27, 1887, the date on which the decision in Philadelphia Steamship Co. v. Pennsylvania, 122 U.S. 326, was promulgated, the doctrine of the cases decided by the Supreme Court upheld the constitutionality of the taxation in question. The State Tax on Railway Gross Receipts, 15 Wall. 284; The Delaware Railroad Tax, 18 Wall. 206." "The Supreme Court of the United States is the supremen arbiter when a Federal question is involved. Down to 1887 that court had ruled the Federal question now under consideration in a way that upheld the legislation in question. Its decisions then promulgated were the supreme law of the land, absolutely binding upon both parties to this cause. Hence all payments of taxes, made under our law, which down to that time must be treated as valid for present purposes, were made in strict conformity to law. The subsequent change in the decisions of the United States Supreme Court is only operative prospectively, and all acts done in obedience to the former decisions are valid and cannot be disturbed."
But the conclusion that "the defendants are not liable to pay as rent the amount paid by them as taxes upon the earnings of the Rutland Road," was also put upon other grounds, namely, that the taxes upon the earnings of the Rutland Railroad were taxes, which, as between the Rutland Company and the Central Vermont Company, it was the duty of the Rutland Company to pay; that, the lease being silent, the duty to pay, under the common law, rested upon the lessor; that this question had been decided in the former suit between the parties; that by the statute of 1882 the thing taxed was the property of the Rutland Company, and the Central Vermont Company was but the collector of the tax; that the Central Vermont Company having been compelled by law to make the payments to discharge an obligation of another, the law implied a promise to repay, and the Central Vermont Company would have an action to recover the amount from the Rutland Company, and a court of equity would avoid circuitry of action; that the Rutland Company, in its treasurer's letter of September 19, 1883, had simply objected that the tax was invalid, and had made no suggestion that the statute was unconstitutional, and no offer to indemnify the Central Vermont Company, and the latter could not, in prudence, do otherwise than pay the taxes, and was under no duty to incur the expense and assume the perils of delay and of litigation, to test the constitutionality of the statute; and that the Rutland Company, in a court of equity, could not have relief for what, as between the parties, itself should have done, and what, by its own laches, it had suffered to be done, professedly in its behalf, by the Central Vermont Company.
These grounds involved no Federal question, and were broad enough to support the judgment, without regard to the question whether the provision of the statute, under which the Central Vermont Company paid the taxes and ...