These were two writs of error to review decrees of the court of chancery for the county of Franklin and state of Vermont, denying, in accordance with mandates of the supreme court of the state, the right of the Rutland Railroad Company, which had leased its railroad to the Central Vermont Railroad Company, to recover the amount of taxes assessed upon the gross earnings of that railroad under the laws of the state, and paid by the Central Vermont Railroad Company, and by it deducted from the rent due to the Rutland Railroad Company under the lease. The case appeared by the record to be as follows:
On December 30, 1870, the Rutland Railroad Company leased its road, including a branch known as the Addison Railroad, for 20 years, to the receivers of the Vermont Central and Vermont & Canada Railroad Companies, at a fixed rent, payable semiannually. On June 21, 1873, the Central Vermont Railroad Company became the receiver of the Vermont Central and the Vermont & Canada Railroad Companies, and took possession of the Rutland Railroad under the lease. Disputes arose between the parties, and on February 23, 1876, they made an agreement in writing, modifying the lease, and by which the rent was made payable monthly, and was to be a certain proportion of the gross earnings, which the lessee guarantied should be not less that $250,000 a year. Neither of the contracts contained any provision for the payment of taxes.
Under the statutes of Vermont of 1874 and 1876, railroads were taxed by the mile in the towns through which they passed; and the supreme court of Vermont, at January term, 1878, in Rutland county, in a case between these parties, not reported, but stated in the opinion of the court below in this case, held that the lessor, and not the lessee, was bound to pay such taxes. See 63 Vt. 12, 25, 26, 21 Atl. 262, 731.
On November 28, 1882, the legislature of Vermont passed a statute, entitled 'An act to provide a revenue for the payment of state expenses,' which repealed all former statutes taxing the property of railroad companies, and required them to pay to the state a tax of a certain proportion of their gross earnings, and provide that the lessee of a railroad should pay this tax, and might deduct the amount from any payments due to lessor. The material provisions of this statute are copied in the margin.
As required by this statute, blank returns of statements of gross earnings were sent in August, 1883, by the commissioner of state taxes, to the Central Vermont Railroad Company; and that company filled out the returns, and paid the taxes on such earning under protest.
A large part of the gross earnings so returned and taxed accrued from the transportation of persons and property between other states and countries through Vermont, and between Vermont and other states and countries.
The Central Vermont Railroad Company paid the rents, when due according to the agreement, until July 31, 1883, but afterwards delayed such payments, and deducted therefrom the sums paid for taxes on gross earnings.
On September 19, 1883, the treasuer of the Rutland Company, by directin of its officers, wrote a letter to the treasurer of the Central Vermont Railroad Company, claiming that the tax was invalid against the Rutland Company, and demanding payment of the rent in full, without deduction on account of the tax. The president of the Rutland Company afterwards, in conversation with the president of the Central Vermont Company, without intending to limit, or being understood to limit, the grounds of objection of the Rutland Company to the payment of the taxes, stated that it had no gross earnings, and therefore could not be liable for the taxes. No other reason for the denial of its liability for the taxes under the statute of 1882 was ever given to the Central Vermont Company.
By an order of court of January 19, 1884, the Central Vermont Railroad Company was discharged of the receivership, and ordered to transfer and make over all the property in its hands, including the lease of the Rutland Railroad, to the Consolidated Railroad Company of Vermont. On June 30, 1884, the transfer was made accordingly; and, on the same day, the latter company leased all the railroads to the Gentral Vermont Railroad Company, which afterwards continued in possession and operation thereof.