the State to collect any specific tax imposed on any railroad in the State by the 20th section. In consideration of the land grant and other privileges, the company was required by that section, within sixty days from the first day of every year, to pay into the state Treasury one per cent. on the cost of the road, its equipment and appurtenances. It was declared lawful for the State after ten years to impose a further tax of two per cent. of the gross earnings of the road, which said above several taxes it was declared "Shall be in lieu of all further taxes to be imposed within this State."

The Act of February 14, 1859, increased the quantity of land authorized to be sold on the completion of each twenty miles of the road, to one hundred and twenty sections. None of the lands were to be taxable for seven years from the first of September then next ensuing, except such as were sold or improved. The company was to be subject to the rate of taxation specified in the 45th section of the Railroad Act of February 12, 1855. The Act of the 15th of February, 1859, repealed the 20th section of the Act of February 14, 1857. The 45th section of the Act of 1855, which was substituted for it, imposed a tax of one per cent. upon the capital stock paid in, and this tax it was declared "Shall be in lieu of all other taxes upon the property of said company, whether real, personal or mixed, except penalties by this Act imposed."

The 37th section of the Act of April 18, 1871, imposed a tax upon the gross receipts of rail road companies, according to the amount of such receipts. And this tax was to be in lieu of all other taxes upon the property of the company, whether real, personal or mixed, except penalties imposed by law, except real property not necessary for carrying on the ordinary operation or franchises of the road. This section declared further that "Only such lands granted to any railroad company shall be liable to local taxation, as may be opposite to and coterminous with the constructed portion and portions of said roads respectively; and that no such lands shall be subject to taxation until after the expiration of three years from and after the first day of April, 1871, and until after three years after the date of the certificates showing that such lands had been earned by said railroad company. It provided that lands opposite to and coterminous with the lines as now in operation, shall be subject to taxation in two years from the first of April, 1871. The Act of April 19, 1873, enacts that all lands earned by any company by the construction of a railroad in the State, shall be assessed and taxed in the same manner as other lands.

Finally, the general Railroad Law of May 1, 1873, taxed the gross receipts of such companies according to their amount, such tax to be in lieu of all others, but there is the same exception as to real estate that is contained in the Act of 1871. Such real estate is made liable to assessment and taxation as is other real estate in the several townships in which the same may be situated.

The Constitution of the State provides that the Legislature may require the collection of specific taxes from banking, railroad, plank road and other corporations, and that taxes

shall be collected from such property as shall be prescribed by law, and that:

"Corporations may be formed under general laws, but shall not be created by special Act, except for municipal purposes. All laws passed pursuant to this section may be altered, amended or repealed."

When this bill was filed, the company had completed about one hundred and twenty miles of their road, leaving about forty-eight to be constructed. A list of the lands granted to the company was made up at the General Land Office.

It embraced about 28,598 acres, in Osceola County. The company has sold about 17,705 acres of these lands, leaving a residue unsold of about 10,892 acres. The latter are the lands described in the bill which the defendants claim the right to assess for taxation. None of the lands last mentioned were opposite to or coterminous with the line of the road in operation in April, 1871. The title of the company to all of them had become complete.

On the 25th of September, 1866, the com. pany executed to the complainants as trustees, a mortgage and deed of trust conveying 153,600 acres of the land, part of the grant, as security for bonds issued to the amount of $500,000. On the 4th of September, 1868, the company executed another mortgage and trust deed to the complainants as trustees, conveying all the residue of the land embraced in the grant to secure additional bonds issued to the amount of $2,500,000. These mortgages and trust deeds conveyed the lands with other property to the trustees on certain trusts, to secure the payment of the bonds. Each contained a power of sale of the lands conveyed, and terms and conditions for the management of the trust, the sale of the land and the application of the proceeds to the payment of the bonds. The complainants accepted the trusts and entered upon their execution. On the first of January, 1873 there had been sold of the bonds secured by the mortgage of 1866, $146,000, and of the bonds secured by the mortgage of 1866, $2,224,000. The money's received from the sale were all applied to the construction and equipment of the road. Some of the bonds have been taken up and canceled. The means of payment were derived from the sales of land under the power of sale in the mortgages. The mortgaged lands included all those before mentioned in Osceola County. The defendants demurred. The circuit court sustained the demurrer and dismissed the bill. In this court the appellants have assigned the following errors:

That the interest of the United States in the lands was not so far extinguished that they were liable to taxation by the State.

That the State, as trustee, has still an interest in the lands inconsistent with taxation.

That there was a contract between the State and the company, that the lands should be ap plied exclusively and without diminution of value to the construction of the road, and that this contract is impaired by taxing them before they are sold and the proceeds so applied.

That the 20th section of the Act of the Leg islature of 1857 contained a contract that none but specific taxes should be imposed upon railroad companies, and that the taxation of the

lands in question under the Act of 1873 was a violation of that contract.

That the State had no power to impair this contract to the prejudice of the company and its creditors.

That the 37th section of the Act of 1871 contained a grant that lands opposite to and coterminous with the constructed portions of the road, should not be subject to local taxation until three years from the first of April, 1871, and that the taxation of the lands in question in 1873 was an impairment of that grant, and illegal.

That the Constitution of Michigan prohibits the imposition of any but specific taxes upon railway corporations.

We shall consider the several propositions without again specifically stating them.

The United States granted the lands to the State for a specific purpose. That purpose was "to aid in the construction of railroads" upon the routes designated. The land was made "subject to the disposal of the Legislature for the purpose aforesaid, and no other." Congress prescribed certain safeguards to secure their application to the construction of the roads, and to prevent failure or diversion. The precautions were few and simple. Except as to the first one hundred and twenty sections, the power of sale was to attach only as the road was completed in successive sections of twenty miles each. Subsequently the extent of the sections and the quantity of land were reduced one half. If the entire road was not completed within the time limited, no further sales were to be made, and all the unsold land was to revert to the United States. Subsequently the reverter was limited to the lands to which the right to sell had not attached. In other words, it was confined to those where the title was inchoate only, and had no application to those where the title was complete. As to those of the former class, there was not, when the bill was filed, and is not now, any default. If the fact were otherwise, it would be for the United States, by office found, or other proper proceeding, to assert their rights. But they do not complain, and the complainants cannot do it vicariously for them. Baker v. Gee, 1 Wall., 333 [68 U. S., XVII., 563]. It is a conclusive answer to the proposition we are considering that the United States have no more claim, legal or equitable, touching the lands here in question than they have to lands which they have sold and patented to others in the regular course of the administration of the Land Department of the government; and that Congress has not seen fit, either expressly or by implication, to impose any restriction upon the taxing power of the State. That subject was remitted, as, under the circumstances, it might well be, wholly to her wisdom and discre. tion.

The State accepted the grant subject to all the conditions prescribed. She thereupon became the agent and trustee of the United States. The powers and duties with which she was clothed might all have been discharged by private individuals. The characters of sovereign and trustee were united in the same party. The State did not in anywise abdicate her Sovereignty by accepting the trust, but the former might be exercised to render more

effectual the discharge of the latter. She was in nowise fettered, except as she had agreed to fulfill all the terms and conditions which accompanied the grant. To that extent she was clearly bound, and anything in conflict with those conditions would be ultra vires and cannot be supported. What were the terms to which she submitted herself? She was to devote the lands to the accomplishment of the object which Congress had in view, and there was an implied agreement on her part to take all the measures reasonably within her power to make their application effectual to that end. The mode was left entirely to herself. We see no ground upon which it can be claimed she bound herself any further. Upon general principles she could not tax the land while the title remained in the United States, nor while she held them as the trustee of the United States, which, in the view of the law, was the same thing. But when the State, proceeding in the execution of the trust, had transferred her entire title to the company, and they had perfected their title and acquired the right to sell, the case assumed a very different aspect, The validity of the mortgages is not drawn in question, and is too clear to be doubted. We need not, therefore, consider that subject. When the mortgages were executed the complainants took the legal title, so far as the company held by that title, and the equitable or inchoate title of the company to the residue of the lands. Copies of the mortgages are not attached to the bill, and we are not advised particularly of their contents. If they contain a covenant of warranty, the legal title, as fast as it was acquired by the company, inured to the mortgagees. Bk. v. Mersereau, 3 Barb. Ch., 528.

If there was no warranty, and the land and not the title of the company was conveyed, the company is barred by estoppel from setting up the after-acquired title, and the estoppel runs with the land. The result is the same as if there had been a warranty. Van Rensselaer v. Kearney, 11 How., 323.

When the grant was made by the State to the company, the entire title before held by the former passed to the latter. Nothing re mained to the State but the performance of the remaining duties of the trust, without any title, present or potential, to the lands.

Forbearance to tax was a bounty voluntarily given by the State. Forbearance for a time doubtless increased, to some extent, the value of the lands. Never to tax would have increased their value still more. N. J. v. Wilson, 7 Cranch, 164. There is no foundation for a claim for one more than for the other. The State, in the Act accepting the grant, agreed, sua sponte, to forbear to tax for seven years. There is no complaint that this stipulation has been violated. Any obligation, legal or equitable, to do more in this way is wanting.

The company, so far as the matter of right is concerned, were upon a footing with all other alienees of the United States. The imposition of taxes can in no just sense be said to be a diminution of the value of the lands. R. R. Co. v. Hayne, 19 Iowa, 143. If Congress had thought so, they would have forbidden it. Liability to taxation is an incident to all real estate. Exemption is an exception. When

upon the decision of this court in the case of Texas v. White, 7 Wall., 700 (74 U. S., XIX., 227). We do not think that decision goes to the extent claimed. The language of this court is:

"Acts necessary to peace and good order among citizens, such, for example, as Acts sanctioning and protecting marriage and the domestic relations; governing the course of descents; regulating the conveyance and transfer of property, real and personal; and providing remedies for injuries to person and estate, and other similar Acts, which would be valid if emanating from a lawful government, must be regarded in general as valid when proceeding from an actual, though unlawful, government."

The creation of insurance and banking companies is not an Act necessary to peace and good order among citizens. It is simply a privilege; a franchise granted by the Govern ment to individuals. It has nothing to do with peace and good order among citizens. Such corporations are not necessary to the social or even business relations of a community.

In the case of Sprott v. The U. S., decided at the present Term of this court (ante, 371), the court goes no further than to affirm the decision in the case of Teras v. White.

But if these Corporations had a legal existence during the time the rebel Legislature assumed to regulate the affairs of the community composing the State of Georgia, such existence ceased with that Legislature. The creature was not greater than its creator. That Legislature could not set up a monument of its power that the Federal Government would be compelled to respect.

Messrs. Denver & Peck and W. W. McFarland, for appellees:

The objection made to the corporate existence of the claimants is, that the Acts of incorporation shown in the record were passed by the Legislature of the State of Georgia while that State was in rebellion against the United States.

It will be observed that the Acts of incorporation are in the usual form for the organization of insurance companies. There is no reference to the rebellion or to the Confederate States; in fact there is nothing in these charters from which the existence of either could be imagined.

It is well known that the insurance business of the United States has been principally done by companies located in the great money centers of the Eastern States. The rebellion brought their transactions in the South to a sudden termination. Hence the necessity for providing new instruments for transacting this business, and these charters were granted to fill up the gap left by the retirement of the old established companies.

The character and influence of this class of business, its necessity in all the peaceable pursuits of life, need no illustration or enforcement. If it differs in any respect from other mercantile pursuits of an innocent character, it is in the generally recognized fact that it must be carried on by the agency of associated cap ital, through incorporated companies. That charters granted for this purpose by the Legis latures of the seceded States are valid, seems

to be placed beyond a doubt by the decisions of this court repeatedly given.

Texas v. White, 7 Wall., 733 (74 U. S., XIX., 240); Horn v. Lockhart, 17 Wall., 580 (84 U. S.. XXI., 660); Sprott v. U. S. (ante, 371); White v. Hart, 13 Wall., 646 (80 U. S., XX., 685); Huntington v. Texas, 16 Wall., 412 (83 U. S., XXI., 318); Taylor v. Thomas, No. 181, not reported, ante, 789.

Mr. Justice Strong delivered the opinion of the court:

These were suits under the Captured and Abandoned Property Act, to recover the proceeds of the sale of cotton captured at Savannah in 1864, and now in the Treasury of the United States. From the findings of fact in the Court of Claims it appears that the plaintiffs are Corporations created by the Legislature of Georgia in 1861 and 1863, while the State was in armed rebellion against the Government of the United States; and the question now presented is, whether such corporation can be recognized as having a legal existence, with capacity to own cotton and to sue in the Court of Claims. It is insisted on behalf of the appellants that the courts of the United States will not recognize the competency of those bodies known as the Legislatures of the insurgent States to create corporations such as insurance, banking and trust companies; and as the plaintiffs in the court below were incorporated under Acts passed after the attempted secession of Georgia from the Union and before the close of the war, it was argued that they can have now no legal existence.

It may well be doubted whether, under the pleadings in the court below, the appellants have any right to raise such an objection here. There was no plea that traversed directly the corporate existence of the plaintiffs. A general denial of the averments of the petition was hardly sufficient. Notwithstanding the old rule that a corporation suing must prove its corporate existence, it has been many times decided that a plea of the general issue admits its capacity to sue, as does going to trial upon the merits. Lehigh Br. Co. v. Lehigh Coal and Nav. Co., 4 Rawle, 9: Sutton v. Cole, 3 Pick., 245; Conard v. Ins. Co., 1 Pet.; 450; Society, etc., v. Pawlet, 4 Pet., 501. And such is the established practice in the Court of Claims. Hebrew Cong. v. U. S., 6 Ct. Cl. Rep., 244.

We do not, however, rest our decision upon this ground. We prefer answering the question which the appellants attempt to raise. No doubt the Legislature of Georgia in 1861 and 1863, when the enactments were made for the incorporation of these plaintiffs, was not the legitimate Legislature of the State. The State had thrown off its connection with the United States, and the members of the Legislature had repudiated or had not taken the oath by which the 3d section of the 6th article of the Constitution requires the members of the several State Legislatures to be bound. But it does not follow from this that it was not a Legislature, the Acts of which were of force when they were made, and are in force now. If not a Legislature of the State de jure, it was at least a Legislature de facto. It was the only law-making body which had any existence. Its members acted under color of office, by an election, though not qual