Alexandria gazette. [volume] (Alexandria, D.C.) 1834-1974, 1878-10-16
Cities have no Right to Tax their
Bonds.


Bonds.
The following decision has been rendered 10
he Supreme Court of the United States:
Nos. 95 and 237. Murray vs. City Council OF
Charleston; jenkins vs. tho same.
In these cases. The city having taxed lta own
stock in The hands Of the holderp, tic question
vas whether the ordinance imposing the tax
is not void as impairing the obligation of the
contract, tbo effect being t. depreclate the
valu, Of the stock. The Court having stated
the case proceeded thus:
We come then to the question whether the
ordinanc, decided by the Court to be valid did
impair the obligation Of tho cty's contract
with the plaintiff. The solution of this ques.
ton depends upon correct understanding OF
what the obligation was. By the certificates of
stock, or city loap, held by the plaintiff, the city
assumed to pay to him the sum mentioned 10
them and to pay six per cent. interest 10 quar-
terIy payments. The obligailon undertaken
therefore was both to pay the interest at the
rate specified and to pay i! to the plslotltt.-
Such was the contrac. and such was the whole
contract. 1t contained no reservation or re-
stricsion Of the duty prescribed. But the city
ordinances, if they can have any force, change
both tho form ard effect OF The undertaking.
They aro the language Ct tho proul'or. 10
substance they say to the creditor, "lIue, our
assumption was to pay to you quarterly sum
of money eq1sl to Elk per cent. per annun CD
the debt we owe you. Such was our exIr.ss
engagement But We now lessen our Obligation.
Irs.ead of paying all the interest to you we re-
tsia a part for ourselves aud substitute the
part retained for a part of what we expressly
promised you" Thus applying the ordinances
to the contract it becomes Very different
thing from what it YVES when it was made,
and the change is effected by legislation, by
ordinances Of the city, enacted uoder asserted
authority of laws passed by the Legislature
That by suoh legislation the obligation OF the
contract is impaired is evident enough, unless
it can be held there was some implied reserVa.
ton of a right 10 the creditor to change lis
terms, a right reserved When the CONTRACT was
made-unluss some power was withheld, not
expressed or disclosed, but whioh cntercd into
ADD limited the exir.ss undertaking. But
how that can below an express contract can
contain 40 implication, or consist with reser'
walton directly contrary to the words OF the
nslrument-hes never yet been discovered.
It has baen strenuou5ly argued on behalf CT
the defendant that the State Ut South Carolina
and the City Council Of Charleston possessed
the poWcr Of taxation when the contracts were
msde; that by the contract the city dill not
surrender this power; that, therefore, The con;
tracts were subject to its possible exercise, ana
that the city ordinances wero only an fXeIton
of il. We are told the power OF the State to
i'm pose taxes upon the subjects Rlthlo Us Ju'
risdiotion is Unlimited with some few eycep'
tlot 81 AID that it extends to everything that
exists by It's authority or is Introduced by Its
permissi1u. Hence it is Inferred that the CON
tracts cf the city of Charleston were made
with reference TO this power and ID subardl.
nation to it.
All this may be admitted, but it does not
meet the cage of the defendant. We % not
question the existence of State power to levy
taxes as claimed nor the subordi cation ct
contracts to it, 80 far as it is unresralned D9
constitutional limita'l)D. But the power Is
DOT ui.hout limits, and ono OF lt5 ilnlta'lens Is
found in the clause Of the federal constitution,
that no State shall pass law impallng the
obligation of contracts A change CT tho cx
press stipulall3ns of contract, or relief OF
debtor from strict and literal compliaoce With
it's RI uuirements, can no more be elected BY 40
exeruon OF the taxing power than it eau DO by
the cxerton Of any other power OF State
Legislature. The constitutions provision against
impalrug contract obligations is limitation
upon tho taxing power as Wellas upon o / legSs
latiop, whatever fyrm it may assume. Indeed.
attempted State taxation is the most frequently
adopted to affect contracts ooottary to the con
sli.ulional Inhibition. 1t most frcqucntlo calls
for the exercise of our supervisory power. Ii
may, then, be safely affirmed that 90 State, by
virtue Ct lis taxing power, can say to DEBTOR
You need not pay your creditor all that you
have promised to him. You may satisfy your
duty to him by retaining a part for yourself or
for some municipality or for theState treasury.
Much less can city say. we Will TAX our
debt to you, and 10 virtue of tue tax withhold
part for our OWN us3.
What, then, is meant by tho doctrine that
contracts arc made with reference to the taxing
power resident in the State and in suoordlna-
ton TO it Is it meant that when a person
leDds money to State or municipal division
OF the State baving the power OF taxation, there
s Ia the contract O tacit reservation OF light
in the debter to raise contributors out ct the
money promised to be paid, before payment!
That cannot be, because if it could the contract
lin the language of Alexander Hamilton) would
"iuVolvo two contradictory thlDgs-an obliga
ton to do and right not to do-an obligation
to pay certain sum and right to retain 1t 10
the shape of O tax. 1t is against the rules both
Of law and reason to admit by application 10
the construction of o contract principle which
goes 10 destruction fit. The truth is, States
ard cities, when they borrow money, and con.
tract to pay it with interest, are not acting as
sovereignlies. They come down to the level OF
ordinary individuals. Their contracts have
the same meaning as that of similar contracts
between private persons. Hence, instead OF
their being, 10 the undertaking of State or
city to pay, reservation of a soveign right to
withhold payment, the coutract should be re,
garded as 40 assurance that such right shall
not be exercised. A promise to pay with
reserved right to deny or change the effect OF
the promise is an absurdty.
Is, then, property which consists in the
promise of State, or Of a municipality OF a
State, beyond the reach Of taxation ? We DO
not affirm that it is. A State msy undoubted-
~ tax any of it's creditors within its Jurisdiction
for the debt due to him, and regulate the
amount of the tax by the rate of interest the
debt bears, if its promise be left unchanged. A
tax thus laid impairs 20 obligation assumed.
T. nIo had bI1tl