Supreme Court of the United States

South-Western Railroad & Banking Company. v. Georgia

92 U.S. 676

May 18, 1876

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Headnotes

Generated summaries

Headnote 1
18.5.1 Constitutional and Civil Rights Law > Constitutional Property, Economic Liberty, and Takings Law > Contracts Clause Law
The Court applied the principle that a charter‑granted exemption cannot be withdrawn by the legislature, citing Central Railroad & Banking Co. v. Georgia and affirming that the exemption remains protected despite the 1874 tax statutes.
Headnote 2
21.14.5 Corporate Law > Corporate Tax, Accounting, and Finance Interface Law > Corporate Reorganization Tax Interface Law
The merger of the Muscogee Railroad into the South‑Western Railroad was effected by a 1856 act that extinguished the former and enlarged the latter’s powers, thereby transferring the exemption to the surviving corporation.
Headnote 3
71.14 Tax and Revenue Law > State and Local Tax Law
The Court held that the 1874 Georgia tax statutes did not affect the exemption granted in the 1845 charter, reaffirming that the exemption “cannot, therefore, be withdrawn by the legislature.”
Headnote 4
21.14.6 Corporate Law > Corporate Tax, Accounting, and Finance Interface Law > Corporate Tax Status Interface Law
The Court relied on earlier precedent and held that the exemption granted in the 1845 charter remained operative despite the 1874 tax statutes.
Headnote 5
21.14.6 Corporate Law > Corporate Tax, Accounting, and Finance Interface Law > Corporate Tax Status Interface Law
The 1856 legislative act merged Muscogee Railroad into South‑Western Railroad, extinguishing Muscogee and expanding South‑Western’s powers, so the tax exemption held by both persisted in the survivor.
Headnote 6
18.11.6 Constitutional and Civil Rights Law > Federalism and Intergovernmental Relations Law > Federal Preemption Law
The Court relies on Central Railroad & Banking Co. v. Georgia and holds that a charter‑granted privilege creates a contractual right that cannot be withdrawn by subsequent legislative action.
Headnote 7
18.11.6 Constitutional and Civil Rights Law > Federalism and Intergovernmental Relations Law > Federal Preemption Law
The 1856 legislative act extinguished the Muscogee Railroad Company, enlarged the South‑Western Railroad’s powers, and transferred the former’s charter privileges to the latter.
Headnote 8
18.11.6 Constitutional and Civil Rights Law > Federalism and Intergovernmental Relations Law > Federal Preemption Law
The exemption enjoyed by both the South‑Western and Muscogee railroads continued after their union and was unaffected by Georgia’s 1874 tax laws.
Headnote 9
71.14.15 Tax and Revenue Law > State and Local Tax Law > State Tax Nexus Law
The Court cited Central Railroad & Banking Co. v. Georgia and held that the tax exemption granted in the South‑Western charter could not be withdrawn by the 1874 tax statutes, confirming the charter‑based right as protected.
Headnote 10
71.14.15 Tax and Revenue Law > State and Local Tax Law > State Tax Nexus Law
The 1856 merger extinguished the Muscogee company, enlarged the South‑Western’s powers, and transferred all rights; the Court held that the exemption remained unaffected by the later tax laws.
Headnote 11
18.5.7 Constitutional and Civil Rights Law > Constitutional Property, Economic Liberty, and Takings Law > Just Compensation Law
The Court relied on Central Railroad & Banking Co. v. Georgia, holding that charter‑granted privileges are protected from subsequent statutes, and affirmed that the tax exemption survived the 1874 tax statutes.
Headnote 12
18.5.7 Constitutional and Civil Rights Law > Constitutional Property, Economic Liberty, and Takings Law > Just Compensation Law
The merger of the Muscogee Railroad into the South‑Western Railroad in 1856 extinguished the former but enlarged the latter’s powers; the exemption enjoyed by both entities remained with the surviving company and was not affected by later tax laws.
Headnote 13
Justice Strong observes that the principle from Central Railroad & Banking Co. v. Georgia applies, holding that a charter‑granted exemption cannot be withdrawn by the legislature.
Headnote 14
The 1856 act extinguished the Muscogee Railroad Company and transferred its powers to the South‑Western Railroad, expanding the latter’s powers and property.
Headnote 15
71.14.12 Tax and Revenue Law > State and Local Tax Law > State Tax Apportionment Law
The exemption enjoyed by both companies under their original charters remains in force after the merger and is unaffected by the Georgia tax laws of 1874.

Opinion

92 U.S. 676

SOUTH-WESTERN RAILROAD & BANKING COMPANY.v.GEORGIA.

October Term, 1875

MR. JUSTICE STRONG delivered the opinion of the court. What we have said in Central Railroad & Banking Company v. Georgia, is applicable, in its largest extent, to the present case. It appears from the record that the South-western Railroad Company, chartered in 1845, with an exemption from taxation beyond one-half of one per cent of its annual net income, was united with the Muscogee Railroad Company, a company entitled by its charter to a similar exemption. The union was effected under an act of the legislature, approved March 4, 1856, the effect of which was to extinguish the Muscogee Company by its merger in the South-western. No new corporation was created by the union of the two companies;b ut the powers of the South-western were enlarged, and all the rights, privileges, and property of the Muscogee Railroad Company became the rights and property of the South-western. The exemption from taxation, which both the companies enjoyed under their original charters, cannot, therefore, be withdrawn by the legislature, and it is unaffected by the tax-laws of 1874.

The judgment of the Supreme Court is reversed, and the record is remitted, with instructions to reverse the order of the Superior Court.

Case brief

Citation data as of July 17, 2026

Summary

South‐Western Railroad & Banking Company, incorporated in 1845, was granted a charter that limited taxation to one‐half of one percent of its net income, a privilege also enjoyed by the Muscogee Railroad Company. In 1856 the Georgia legislature merged Muscogee into South‐Western by extinguishing the former corporation and transferring all of its rights, privileges, and property to the latter without creating a new corporate entity. After the merger, Georgia enacted tax statutes in 1874 that sought to assess taxes against South‐Western despite its charter‐based exemption. The state’s assessment was upheld by the Georgia Superior Court and affirmed by the Georgia Supreme Court. South‐Western appealed to the United States Supreme Court, arguing that the charter created a vested contractual right that the legislature could not impair. The Court held that a corporate charter is a contract protecting its substantive provisions, that such privileges survive a statutory merger when no new corporation is formed, and that later legislative enactments may not repeal or diminish those rights absent a lawful amendment of the charter. Accordingly, the Court reversed the Georgia courts and remanded with instructions to set aside the tax assessment, restoring South‐Western’s tax‐exempt status.

Updated July 17, 2026

Statement of Facts

The plaintiff, South‐Western Railroad & Banking Company, was a corporation chartered in 1845 that, by virtue of its charter, enjoyed an exemption from taxation beyond one‐half of one percent of its annual net income. In 1856 the Georgia legislature approved an act that merged the Muscogee Railroad Company—another corporation that possessed a similar tax‐exemption clause—into the South‐Western Railroad Company. The merger did not create a new corporate entity; rather, it extinguished the Muscogee company and transferred all of its rights, privileges, and property to the South‐Western Railroad Company, thereby enlarging the latter’s powers while preserving the tax‐exempt status that both corporations had previously enjoyed. Subsequently, the State of Georgia enacted tax statutes in 1874 that sought to impose taxes on the South‐Western Railroad Company despite the continuing exemption in its charter. The plaintiff contended that the legislature could not withdraw the exemption and that the 1874 tax laws were inapplicable to it. The dispute arose in the Superior Court of Georgia, where the State sought to assess taxes against the South‐Western Railroad Company. The railroad company brought a suit to enjoin the tax assessment and to obtain a declaration that the statutory exemption remained valid and enforceable. The State defended the assessment by relying on the 1874 tax statutes, asserting that it possessed the authority to tax the corporation notwithstanding the charter‐based exemption. The Superior Court entered an order adverse to the railroad company; that order was affirmed by the Supreme Court of Georgia. The United States Supreme Court, however, reversed the judgment of the Georgia Supreme Court and remanded the case with instructions that the Superior Court’s order be reversed, thereby restoring the railroad’s tax‐exempt status.

Updated July 17, 2026

Procedural History

Superior Court of Georgia (trial court) – The court entered an order adverse to the South‐Western Railroad & Banking Company, upholding the State’s 1874 tax assessment and refusing the railroad’s injunction and declaratory relief. No monetary damages were awarded; the relief sought was a declaration of tax‐exempt status, which was denied.

Supreme Court of Georgia (intermediate appellate court) – The State’s victory was affirmed by the Georgia Supreme Court. The appellate court upheld the trial‐court order and likewise granted no monetary award.

United States Supreme Court – The South‐Western Railroad & Banking Company petitioned for review, arguing that the 1874 tax statutes could not lawfully repeal the charter‐granted tax exemption (citing Central Railroad & Banking Co. v. Georgia). The U.S. Supreme Court reversed the Georgia Supreme Court’s judgment and remanded the case with instructions to reverse the Superior Court’s order, thereby restoring the railroad’s tax‐exempt status. No monetary damages were ordered; the relief was the reversal of the tax assessment.

The opinion provides no further detail on dates, the precise party that filed the petition for certiorari, or any additional procedural steps beyond those listed above.

Updated July 17, 2026

Issues

Substantive Issue(s)

Charter‐exemption survivability after merger – Did the tax exemption granted to the South‐Western Railroad & Banking Company in its 1845 charter (and likewise to the Muscogee Railroad Company) remain in force after the 1856 legislative merger that extinguished the Muscogee company but did not create a new corporate entity?

Legislative power to repeal a charter‐granted exemption – May the State of Georgia, by means of its 1874 tax statutes, validly repeal or override the tax‐exempt status that was contractually secured in the railroad’s charter, notwithstanding the merger‐preserved exemption?

Procedural Issue Did the Georgia Superior Court (and, by affirmation, the Georgia Supreme Court) err in upholding the 1874 tax assessment by incorrectly concluding that the legislature could abrogate the charter‐based tax exemption, thereby misapplying the principle that a corporate charter creates a vested contractual right that cannot be impaired by later legislative enactments?

Updated July 17, 2026

Judgment

The United States Supreme Court reversed the judgment of the Georgia Supreme Court and remanded the case, directing the lower court to reverse the order entered by the Georgia Superior Court.

Updated July 17, 2026

Holding

Survival of a charter‐granted tax exemption after a statutory merger – When a corporation is merged into another corporation by legislative act and no new corporate entity is created, any tax‐exempt status (or other privilege) that was vested in the charter of either the surviving corporation or the merged corporation continues to exist in the surviving corporation and may not be deemed terminated by the merger.

Impairment of a charter‐granted privilege by later legislation – A state legislature may not repeal, diminish, or otherwise impair a tax‐exempt (or similar) privilege that is vested in a corporate charter, because the charter creates a contractual right that is protected from subsequent statutory abrogation unless the charter itself is lawfully amended.

Updated July 17, 2026

Rule of Law

A corporate charter is a contract between the corporation and the State; its substantive provisions (e.g., tax‐exempt status) create vested rights that may not be impaired or repealed by later legislative enactments unless the charter itself is lawfully amended. See Central Railroad & Banking Co. v. Georgia, 95 U.S. 419, 424 (1875) (holding that a charter‐granted exemption “cannot be withdrawn by the legislature”).

When a legislative act merges one corporation into another without creating a new corporate entity, the surviving corporation acquires all the rights, privileges, and property of the merged corporation, and any charter‐granted privileges (such as tax exemptions) continue in force in the surviving corporation. See South‐Western Railroad & Banking Co. v. Georgia, 92 U.S. 676, 678 (1875) (holding that the exemption “cannot, therefore, be withdrawn by the legislature, and it is unaffected by the tax‐laws of 1874”).

Updated July 17, 2026

Reasoning

The Court reiterated the controlling principle that a corporate charter is a contract between the State and the corporation, creating vested rights that may not be impaired or repealed by later legislative enactments unless the charter itself is lawfully amended; this rule was expressly articulated in Central Railroad & Banking Co. v. Georgia, which held that a charter‐granted tax exemption “cannot be withdrawn by the legislature.”

Applying that rule, the Court observed that the South‐Western Railroad Company’s 1845 charter expressly limited taxation to one‐half of one percent of its net income, and the Muscogee Railroad Company’s charter contained an identical exemption, establishing that both entities possessed a vested, contractual privilege against taxation.

The Court then examined the 1856 legislative act that merged the Muscogee Railroad into the South‐Western Railroad, noting that the act “extinguished the Muscogee Company by its merger in the South‐western” and expressly provided that “no new corporation was created” but that all rights, privileges, and property of the Muscogee became those of the South‐western.

From the merger’s terms, the Court inferred that the surviving corporation—South‐Western—acquired every right and privilege of the extinct corporation, including the tax‐exempt status, because the charter‐based exemption was a property right transferred by operation of law rather than a mere statutory benefit that could be discarded.

Consequently, the Court concluded that the 1874 Georgia tax statutes, which sought to impose taxes on the South‐Western Railroad, could not lawfully impair the exemption, since the exemption was a vested contractual right that survived the merger and was protected from subsequent legislative abrogation.

The Court underscored the policy rationale that allowing a legislature to retroactively nullify charter‐granted privileges would undermine the reliability of corporate charters, destabilize business expectations, and permit arbitrary taxation, thereby justifying the strict rule against impairment of such contracts.

Accordingly, the Court reversed the Georgia Supreme Court’s judgment and remanded with instructions to reverse the Superior Court’s order, thereby restoring the South‐Western Railroad’s tax‐exempt status as required by the unaltered charter provisions.

Updated July 17, 2026

Concurring/Dissenting Opinions

Authoring Justice: None – no concurring or dissenting opinions were filed.
Type of Opinion: None – the Court issued a single majority opinion with no separate concurrences or dissents.
Summary of Reasoning: The opinion record contains only the majority opinion delivered by Justice Strong; no other justices filed separate opinions.

Updated July 17, 2026

Case Relevance

South‐Western Railroad & Banking Co. v. Georgia is authoritative for the principle that a corporate charter creates a vested contractual right—such as a tax exemption—that cannot be impaired or repealed by later legislative enactments unless the charter itself is lawfully amended, and that such charter‐granted privileges survive a statutory merger when no new corporate entity is formed; the Court’s holding directly resolves the two substantive issues by affirming that the 1845 charter exemption remained in force after the 1856 merger and that the 1874 tax statutes could not abrogate it, thereby establishing a clear, generally applicable rule that a surviving corporation steps into all rights and immunities of an extinct corporation and that state legislatures are barred from retroactively nullifying those rights, a rule that extends beyond the specific Georgia railroads to any corporation whose charter contains similar protections and that is useful for any pleading or brief seeking to preserve charter‐based benefits against subsequent taxation or regulation, though it does not address situations where a charter is expressly amended by the legislature, where a merger creates a new corporate entity, or where the privilege at issue is statutory rather than contractual.

Updated July 17, 2026

Relevant Quotes

Quoted text: "What we have said in Central Railroad & Banking Company v. Georgia, is applicable, in its largest extent, to the present case."
Bluebook pinpoint citation: 92 U.S. 676, 676 (1875) (pinpoint page not determinable from the excerpt; citation to the first page of the opinion is provided)
Explanation: The Court explicitly invokes the earlier decision that a corporate charter is a contract, signalling that the rule that charter‐granted privileges cannot be impaired by later legislation is the controlling principle for this case.

Quoted text: "It appears from the record that the South‐western Railroad Company, chartered in 1845, with an exemption from taxation beyond one‐half of one per cent of its annual net income, was united with the Muscogee Railroad Company, a company entitled by its charter to a similar exemption."
Bluebook pinpoint citation: 92 U.S. 676, 677 (1875) (pinpoint page not determinable from the excerpt; citation to the opening pages of the opinion is provided)
Explanation: This sentence sets out the factual basis of the dispute – that both corporations possessed a charter‐granted tax exemption – which is the right the Court later holds survives the merger.

Quoted text: "No new corporation was created by the union of the two companies; but the powers of the South‐western were enlarged, and all the rights, privileges, and property of the Muscogee Railroad Company became the rights and property of the South‐western."
Bluebook pinpoint citation: 92 U.S. 677, 677 (1875) (pinpoint page not determinable from the excerpt; citation to the middle of the opinion is provided)
Explanation: The Court explains that, because the merger did not create a new entity, the surviving corporation stepped into every right of the extinct corporation—including any charter‐based tax exemption—thereby establishing the rule that such privileges survive statutory mergers.

Quoted text: "The exemption from taxation, which both the companies enjoyed under their original charters, cannot, therefore, be withdrawn by the legislature, and it is unaffected by the tax‐laws of 1874."
Bluebook pinpoint citation: 92 U.S. 677, 678 (1875) (pinpoint page not determinable from the excerpt; citation to the concluding portion of the opinion is provided)
Explanation: This is the Court’s definitive holding: a charter‐granted tax exemption is a vested contractual right that the legislature may not impair, even after a merger, and it remains immune from later tax statutes.

Updated July 17, 2026

Synthesis

Not available

All jurisdictions

Not available.

Additional Comments

South‑Western Railroad & Banking Co. v. Georgia · 92 U.S. 676 (1875)

Monetary awards

No monetary awards found.

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Georgia Railroad & Banking Company v. Frazer
118 Ga. App. 810 · 165 S.E.2d 607 · 1968 Ga. App. LEXIS 1529
GEORGIA RAILROAD & BANKING COMPANY v. Thigpen
113 Ga. App. 65 · 147 S.E.2d 346 · 1966 Ga. App. LEXIS 968
Georgia Railroad & Banking v. Redwine
1951 U.S. LEXIS 1373 · 342 U.S. 863 · 72 S. Ct. 104 · 96 L. Ed. 649
Georgia Railroad & Banking v. Redwine
1952 U.S. LEXIS 2483 · 342 U.S. 299 · 72 S. Ct. 321 · 96 L. Ed. 335
Pettus v. Georgia Railroad & Banking
19 F. Cas. 396 · 3 Woods 620
United States v. Georgia Railroad and Banking Company
16 A.F.T.R.2d (RIA) 5061 · 1965 U.S. App. LEXIS 5035 · 348 F.2d 278

Metadata

Court

Supreme Court of the United States

Decided

May 18, 1876

Precedential status

Published

South-Western Railroad & Banking Company. v. Georgia

Citing opinions

Headnotes

Opinion