Source: https://supreme.justia.com/cases/federal/us/173/636/
Timestamp: 2019-04-19 08:41:47+00:00

Document:
The questions raised by the eighth and ninth assignments of error, relating to alleged violations of the Fourteenth Amendment to the Constitution of the United States, are not presented by the record, and do not result by necessary intendment therefrom, and are therefore not considered by the Court, under the well settled rules that the attempt to raise a federal question for the first time after a decision by the court of last resort of a state is too late, and that where it is disclosed that an asserted federal question was not presented to the state court or called in any way to its attention, and where it is not necessarily involved in the decision of the state court, such question will not be considered by this Court.
The mere grant for a designated time of an immunity from taxation does not take it out of the rule subjecting such grant to the general law retaining the power to amend or repeal, unless the granting act contain an express provision to that effect.
The Act of the Legislature of Kentucky of February 14, 1856, and the Act of May 12, 1884, c. 1412, incorporating the Citizens' Savings Bank of Owensboro, and the Act of May 17, 1886, commonly known as the Hewitt Act, and other acts referred to, did not create an irrevocable contract on the part of the state protecting the bank from other taxation, and therefore the taxing law of Kentucky of November 11, 1892, c. 108, did not violate the contract clause of the Constitution of the United States.
The case was argued with Nos. 148, 149, 150 and 151, the reports of which follow it.
"into the state treasury, for the benefit of revenue proper, fifty cents on each one hundred dollars of stock held and paid for in said bank, which shall be in full of all tax and bonus thereon of every kind."
"SEC. 1. That all charters and grants of or to corporations, or amendments thereof, and all other statutes, shall be subject to amendment or repeal at the will of the legislature, unless a contrary intent be therein plainly expressed, provided that whilst privileges and franchises so granted may be changed or repealed, no amendment or repeal shall impair other rights previously vested."
"SEC. 3. That the provisions of this act shall only apply to charters and acts of incorporation to be granted hereafter, and that this act shall take effect from its passage."
"SEC. 1. That shares of stock in state and national banks, and other institutions of loan or discount, and in all corporations required by law to be taxed on their capital stock, shall be taxed 75 cents on each share thereof, equal to $100, or on each $100 of stock therein owned by individuals, corporations or societies, and said banks, institutions and corporations shall, in addition, pay upon each $100 of so much of their surplus, undivided surplus, undivided profits or undivided accumulations as exceeds an amount equal to ten percent of their capital stock, which shall be in full of all tax, state, county and municipal."
"SEC. 4. That each of said banks, institutions, and corporations, by its corporate authority, with the consent of a majority in interest of a quorum of its stockholders at a regular or called meeting thereof, may give its consent to the levying of said tax, and agree to pay the same as herein provided, and to waive and release all right under the act of Congress, or under the charters of the state banks, to a different mode or smaller rate of taxation, which consent or agreement to and with the State of Kentucky shall be evidenced by writing under the seal of such bank and delivered to the governor of this commonwealth, and upon such agreement and consent being delivered, and in consideration thereof, such bank and its shares of stock shall be exempt from all other taxation whatsoever so long as said tax shall be paid during the corporate existence of such banks."
"SEC. 5. The said bank may take the proceeding authorized by section 4 of this act at any time until the meeting of the next General Assembly, provided they pay the tax provided in section 1 from the passage of this act."
"SEC. 6. This act shall be subject to the provisions of section eight (8), chapter sixty-eight (68), of the General Statutes."
make the consent and agreement as prescribed in section 4, the shares of stock of such bank, institution or corporation, and its surplus, undivided accumulations and undivided profits, shall be assessed as directed by section 2 of this act, and the taxes -- state, county and municipal -- shall be imposed, levied, and collected upon the assessed shares, surplus, undivided profits, undivided accumulations, as is imposed on the assessed taxable property in the hands of individuals, provided that nothing herein contained shall be construed as exempting from taxation for county or municipal purposes any real estate or building owned and used by said banks or corporations for conducting their business, but the same may be taxed for county and municipal purposes as other real estate is taxed."
"SEC. 174. All property, whether owned by natural persons or corporations, shall be taxed in proportion to its value, unless exempted by this constitution, and all corporate property shall pay the same rate of taxation paid by individual property. Nothing in this constitution shall be construed to prevent the General Assembly from providing for taxation based on income, licenses or franchises."
the duty of the board to certify its valuation of the property or franchises to the proper county or municipality in which the corporation was located, so that the sum of this assessment might become the basis upon which the local taxes should be laid. The City of Owensboro, where the Citizens' Savings Bank was located, established by ordinances the rate of municipal taxes for the years 1893 and 1894, and the sum so fixed was assessed upon the valuation of the franchises or property of the bank which had been certified by the state board in claimed conformity to the statute of 1892. The bank refused to pay these taxes, and a levy was made by the tax collector upon some of its property, and garnishment process was also issued against several of its debtors. Thereupon this suit was commenced by a petition, on behalf of the bank, to enjoin the City of Owensboro and its tax collector from enforcing the taxes in question.
upon the assessment by the state board was dehors the powers of the City of Owensboro under the state laws. Fifth. That the taxes, moreover, violated the equality clause of the state constitution because, as there were certain national banks doing business in the City of Owensboro against whom the franchise tax provided by the state law could not be enforced without a violation of the law of the United States, therefore these banks could not be taxed for the franchise tax, and not to tax them, while taxing the petitioner, would bring about inequality of taxation, and hence be a violation of the state constitution. Sixth. The taxes were expressly and particularly attacked on the ground that the Hewitt Act, and the acceptance of the terms thereof, constituted an irrevocable contract between the state and the bank, exempting it from all taxation other than as specified in the Hewitt Act, and therefore that the Revenue Act of 1892 and the levy of the taxes in question by the City of Owensboro violated the contract rights of the bank, which were protected from impairment by the Constitution of the United States.
In further support of this ground the petition charged that at the time the Hewitt Act was passed, the bank had an irrevocable contract arising from section 7 of its charter, limiting taxation to the sum there specified, which right the bank had surrendered in consequence of the contract embodied in the Hewitt Act. It was averred that this surrender of its contract right to enjoy the limited taxation conferred by its charter was a valid consideration moving between the bank and the state, operating to cause the Hewitt Act to become a contract upon adequate consideration.
the Court of Appeals of Kentucky the decree of the trial court was affirmed. 39 S.W. 1030.
The opinion of the Kentucky Court of Appeals contained not only the reasons applicable to the case we are now considering, but also such as were by it considered relevant to several other cases, which, it would seem, were either heard by that court at the same time or were deemed by the court to present so many cognate questions as to enable it to embrace the several cases in one opinion. Insofar as it related to this cause, the opinion fully examined and disposed of the question of contract and the issues consequent thereon. An application on behalf of the appellant was thereafter filed, styled "Petition for Extension of Opinion and Reversal." This application, while declaring that the appellant could not assent to the conclusion of the court on the question of the existence of an irrevocable contract, protected from impairment by the Constitution of the United States, asked no rehearing on that subject. The grounds for rehearing, which were elaborately pressed, related solely to certain questions of law which it was argued the record presented and which it was claimed depended on the state law and constitution. There was no contention that these issues involved the Constitution or laws of the United States.
the equal protection of the laws, in violation of the Fourteenth Amendment to the Constitution of the United States.
166 U. S. 648; Kipley v. Illinois, 170 U. S. 182; Green Bay & Mississippi Canal Co. v. Patten Paper Co., 172 U. S. 58; Capital Bank v. Cadiz Bank, 172 U. S. 425. We therefore decline to review the errors alleged in the eighth and ninth assignments, and, passing their consideration, are brought to the real federal controversy which arises on the record -- that is, the question of irrevocable contract.
"Immunity from taxation, constituting in these cases a part of the contract with the government, is, by the reservation of power such as is contained in the law of 1841, subject to be revoked equally with any other provision of the charter whenever the legislature may deem it expedient for the public interests that the revocation shall be made. The reservation affects the entire relation between the state and the corporation, and places under legislative control all rights, privileges, and immunities derived by its charter directly from the state."
the corporation and its franchises and immunities, derived directly from the state, were thus under its control."
"In short, the immunity from taxation granted by the act of 1882 was accompanied with the condition -- expressed in the act of 1856 and made part of every subsequent statute, when not otherwise expressly declared -- that by amendment or repeal of the former act, such immunity could be withdrawn. Any other interpretation of the act of 1856 would render it inoperative for the purposes for which manifestly it was enacted."
at the time the act of 1886 was passed, to withdraw the exemption from taxation -- not that the power reserved would never be exerted, so far as taxation was concerned, if, in the judgment of the legislature, the public interest required that to be done. The power expressly reserved to amend or repeal a statute should not be frittered away by any construction of subsequent statutes bases upon mere inference. Before a statute -- particularly one relating to taxation -- should be held to be irrepealable or not subject to amendment, an intent not to repeal or amend must be so directly and unmistakably expressed as to leave no room for doubt; otherwise, the intent is not plainly expressed. It is not so expressed when the existence of the intent arises only from inference or conjecture."
The conclusions stated in these cases are but the expression of many other adjudged causes. Railroad Company v. Georgia, 98 U. S. 359, 98 U. S. 365; Hoge v. Railroad Company, 99 U. S. 348, 99 U. S. 353; Sinking Fund Cases, 99 U. S. 700, 99 U. S. 720; Greenwood v. Freight Company, 105 U. S. 13, 105 U. S. 21; Close v. Glenwood Cemetery, 107 U. S. 466, 107 U. S. 476; Louisville Gas Company v. Citizens' Gas Company, 115 U. S. 683, 115 U. S. 696; Gibbs v. Gas Company, 130 U. S. 396, 130 U. S. 408; Sioux City Street Railway v. Sioux City, 138 U. S. 98, 138 U. S. 108.
decision entered into the consideration of the parties in forming the contract. It is not pretended that the bank whose rights are here contested was either a party or privy to the Bank Tax Cases. And even if such were the case, we must not be understood as intimating that the construction of the Hewitt Act which was announced in the Bank Tax Cases would be binding in controversies as to other taxes between those who were parties or privies to those cases. On this subject we expressly abstain from now intimating an opinion. In determining whether in any given case a contract exists protected from impairment by the Constitution of the United States, this Court forms an independent judgment. As we conclude that the decision in the Bank Tax Cases, above cited, upon the question of contract was not only in conflict with the settled adjudications of this Court, but also inconsistent with sound principle, we will not adopt its conclusions.
would be a discrimination in favor of these banks and against the national banks, which was forbidden by the law of the Unites states. To add to this complexity, it is said the varying rate of local taxation was operating inequality among banks, and driving banking capital from the localities where the tax was highest, thus producing a public detriment. To assuage these difficulties and conflicts, to secure as to all banks, state and national, a uniform and higher rate of state taxation than that existing as to other property, it is asserted that the Hewitt Law tendered to all banks a contract giving freedom from local burdens if a higher state tax was voluntarily paid. This must have been contemplated to be irrevocable, for otherwise the very object of the law could not have been accomplished. Conceding, arguendo, to the fullest degree, the situation to have been as described, the conclusion sought to be deduced from it is wholly unsound, since it disregards the fact that the contract proposed, and which was actually entered into, contained an express reservation of the right to repeal, alter, or amend. Indeed, the contention, when analyzed, amounts to this: that the plain letter of the contract should be disregarded upon the theory that the parties intended to make a different contract from that which they actually entered into. The distinction between the potentiality of a particular state of facts for the purpose of preventing the implication of the reserved power to alter, amend, or repeal, and the impotency of such facts to overcome the express and unambiguous provisions of the contract at once demonstrates the confusion of thought involved in the contention. It was upon the distinction existing between the implication of the power to amend, alter, or repeal and its express statement in a contract that the case of New Jersey v. Yard, 95 U. S. 104, proceeded, and that case is therefore wholly inapposite to the controversy here presented.
"a contrary intent be therein plainly expressed [in the act creating the right], provided, that whilst privileges and franchises so granted may be changed or repealed, no amendment or repeal shall impair other rights previously vested."
The bank, it is asserted, had under its charter a right to be taxed only to a limited amount, and this, it is claimed, constituted a contract which was surrendered on the theory that the Hewitt Law was irrevocable, and, if it were not so, then there was no surrender of the right under the charter, and therefore it now exists. This contention, however, but states in another form the claims which we have already disposed of. The charter was conferred on the bank subsequent to the act of 1856, and the limit of taxation stated in the charter was therefore subordinated to that act, and subject to the exercise of the power of amendment or repeal. True it is, in Franklin County Court v. Deposit Bank of Frankfort (June, 1888), 87 Ky. 387, 382, the Court of Appeals of Kentucky decided that a grant, after the act of 1856, of an exemption from taxation for a designated time signified such a plain manifestation of the will of the legislature that the grant should not be subject to alteration or amendment, that the right so conferred was therefore not submitted to the paramount power of repeal or amendment reserved by the act of 1856. This decision, however, was rendered long after the enactment of the charter of the bank whose rights are now before us, and has been expressly overruled by the Court of Appeals in the case which we are reviewing. The doctrine settled by the adjudications of this Court is this: that the mere grant for a designated time of an immunity from taxation does not take it out of the rule subjecting such grant to the general law retaining the power to amend or repeal unless the granting act contain an express provision to that effect. The doctrine on which the argument depends is that any grant for a designated time is, by implication, taken out of the general rule even although there be no express provision to that end in the act making the grant.
or charter that it is to last for a given period of time, therefore such provision is a plain manifestation of the intention of the legislature that the grant or charter shall not be repealed or amended for the time for which it was declared that it should exist, is fallacious, since it overlooks the consideration that the limit of time fixed for the duration of the charter or grant, like every other provision therein, is qualified by the reserved power to alter, amend, or repeal. It hence results that where, in a charter or grant enacted, when there is a general statute reserving the power to repeal, alter, or amend, a time is stated, the granting act must be read just as if it declared that the charter or grant should exist for a designated time unless sooner repealed, altered, or amended. Indeed, reduced to its final analysis, the argument that because, in a grant or charter, a time is designated for its duration, it cannot therefore until the expiration of such time, be repealed, altered, or amended, is equivalent to saying that the reserved power cannot be exercised in any case of contract, for if every case of charter or grant where a time is fixed, either expressly or by necessary construction, in the charter or grant is taken out of the reach of the reserved power, it would follow that only those charters or grants which were determinable at will would come under the control of the power reserved. But to say this simply amounts to declaring that the reserved power applies and can be enforced only in those cases where it would be entirely unnecessary or useless to do so.
case, suggested that when the legislature was enacting a charter for a corporation, a provision in the statute reserving to the legislature the right to amend or repeal it must be held to be a part of the contract itself, and the subsequent exercise of the right would be in accordance with the contract, and could not therefore impair its obligation. And he cites with approval the observations we have already quoted from the case of Wales v. Stetson, 2 Mass. 143. It would seem that the states were not slow to avail themselves of this suggestion. . . ."
As, then, the limitation in the charter of the bank was subject to repeal by the legislature, it cannot be claimed that such exemption was vested in the bank, and was therefore subject to be reinstated if the Hewitt Act was not an irrevocable contract, even if the correctness of the claim that this result would legally arise if the charter had been an irrevocable contract be, arguendo, conceded.
"Such an act may be amended -- that is, it may be changed by additions to its terms, or by qualifications of the same. It may be altered by the same power, and it may be repealed. What is it that may be repealed? It is the act of incorporation. It is this organic law on which the corporate existence of the company depends which may be repealed, so that it shall cease to be a law, or the legislature may adopt the milder course of amending the law in matters which need amendment, or altering it when it needs substantial change. All this may be done at the pleasure of the legislature. That body need give no reason for its action in the matter. The validity of such action does not depend on the necessity for it or on the soundness of the reasons which prompted it."
considering what constituted vested rights, the Court clearly pointed out that rights of this character did not embrace mere privileges or franchises conferred by the granting act, and such rights obviously came within the power to repeal and amend, and were not within the category of those taken out of the reach of such power.
In the Greenwood case, the reserved power was, by the general statute, authorized to be exercised "at the pleasure of the legislature." But this qualification was decided in Hamilton Gas Light Company v. Hamilton City, 146 U. S. 271, to be no more comprehensive than the power which would be implied from a general law simply reserving the right to repeal, alter, or amend.
regained its rights to make such charges for water furnished for fire protection as it could rightfully have done before the act of 1882 was passed, and whilst its property was subject to taxation."
Finally it is said that as at the time the Hewitt Act was passed, the rate of state taxation was lower than the sum of taxation fixed by that act on the banks giving their assent to it, therefore this increased sum over and above the amount of state taxes paid by other taxpayers to the state constituted a consideration received by the state, and created a vested right of such a nature that the state could not repeal the Hewitt Act without providing for the refunding of the sum paid the state in excess of the state taxes paid by other taxpayers. But this disregards the patent fact that while the amount of the state taxes paid by the bank under the Hewitt Act was larger than the taxes paid by other taxpayers to the state, the bank was by the Hewitt Act relieved from all obligation to pay county and municipal taxes. As the bank had, at the time of the Hewitt Act, no contract limiting the taxing power of the state which could not have been repealed, it therefore could have been subjected by the state to the same rate of county and municipal taxes resting upon other taxpayers. It is not asserted that if this legislative power had been exerted and the bank been compelled to pay the same amount of taxation for all governmental purposes that other property owners were obliged to pay, it would not have contributed more than it was called upon to do under the Hewitt Act. The claim therefore amounts to this: that because the Hewitt Act relieved the bank from a part of the burden of taxation which rested upon the other taxpayers of the state, and this relief from burden was purely the result of the voluntary act of the lawmaker, the power to remove the privilege cannot be exerted without refunding to the bank a portion of the lesser burden which it has paid. Thus, to analyze the proposition is to answer it.
The cogency with which the opinion of the Court is expressed is calculated to awaken a distrust as to the soundness of any conflicting views; but the very fact that the court to which this writ of error was issued, only two years before the decree was pronounced which this Court has affirmed, came to a precisely opposite conclusion upon the same state of facts, indicates at least that the question is not free from a reasonable doubt. Indeed, the judiciary of Kentucky appears to be about equally divided upon the subject.
"such bank and its shares of stock should be exempt from all other taxation whatever, so long as said tax shall be paid during the corporate existence of such bank."
There was a further provision that in case of refusal to enter into this compact, the bank should be assessed as directed by a previous section, and such state, county, and municipal taxes imposed as were imposed on the assessed taxable property in the hands of individuals.
a corporation is a contract, it follows that, so far as it is a charter it is, under the act of 1856, subject to amendment or repeal; but so far as the legislature departs from the main object of the charter of granting privileges and franchises, and invites its corporations to enter into written contracts with it, requires such contracts to be executed in an unusual form, and to receive the consent not only of the directors, but of a majority of its stockholders, and, further, that they be made under seal and delivered to the governor of the commonwealth, that then it evinces an intent, as clearly as language can express it, that such contract shall be binding, and that, in respect thereto, it yields up its right to amendment or repeal. New Jersey v. Yard, 95 U. S. 104. To hold that a contract thus solemnly entered into may be repudiated at the next session of the legislature is practically to say that the legislature may set a trap for its corporations, and that after it has enticed them into it by the offer of more favorable terms than they otherwise could obtain, it may repudiate its own obligations without restoring to the corporations what it had previously induced them to give up.
providing for wholly different mode of assessment and taxation, and that it is more reasonable to assume that the taxing officers of the City of Owensboro exceeded their authority in attempting to exact the taxes in question.
The cases cited in the opinion of the Court are not in conflict with the position here assumed. In Tomlinson v. Jessup, 15 Wall. 454, it was decided that an act of the Legislature of South Carolina, passed in 1851, incorporating the Northeastern Railroad Company, and a subsequent act passed in 1855, providing that its stack should be exempt from taxation during the continuance of the charter, were subservient to a general act passed in 1841, reserving the right to amend, alter, or repeal every such charter unless the act granting such charter should, in express terms, except it. As the amended charter in question contained no clause excepting it from the provisions of the general act of 1841, it was held that its property might be taxed by subsequent legislation. The case differs from the one under consideration in the fact that the amended charter contained no exception taking it out of the act of 1841, and that there was no express contract in that charter that no tax should be subsequently imposed. There was nothing to indicate that this charter was not intended to fall within the restrictions of the act of 1841.
the contract of incorporation, stand upon a different footing." In its application to this case, it is subject to the same criticism as that of Tomlinson v. Jessup.
The case of Louisville Water Co. v. Clark, 143 U. S. 1, arose under the same act of Kentucky of 1856. In that case, an immunity from taxation, conferred upon the water company by an act passed in 1882, was withdrawn by a subsequent act passed in 1886, and it was held that, as the act of 1882 contained no clause that "plainly expressed" an intention not to exercise the power reserved by the statute of 1856 to amend or repeal at the will of the legislature all charters or grants to corporations, the act was subject to that general statute, for the very reason that there was no "contrary intent" "plainly expressed." The opinion harmonizes completely with the position here assumed, and contains a clear inference that where a subsequent act plainly evinces an intention on the part of the legislature that the general statute of 1856 should not apply, such intention will be respected, and will control the operation of the general statute. If the Hewitt Act does not evince such intention, of course, the whole argument falls to the ground, but it seems to me that its language in this particular is too clear to be disregarded.
"particularly one relating to taxation, should be held to be irrepealable or not subject to amendment, an intent not to repeal or amend must be so directly and unmistakably expressed as to leave no room for doubt; otherwise, the intent is not plainly expressed. It is not so expressed when the existence of the intent arises only from inference or conjecture."
"Can it be believed that it was intended by either party to this contract that, after it was signed by both parties, one was bound forever, and the other only for a day? That it was intended to be a part of the contract that the State of New Jersey was at her option, to be bound or not? That there was implied in it, when it was offered to the acceptance of the company, the right on the part of the legislature to alter or amend it at pleasure? If the state intended to reserve this right, what necessity for asking the company to accept in such formal manner the terms of a contract which the state could at any time make to suit itself?"
I find it difficult to see how that case and the one under consideration can stand together.
"that the amount of its circulation should not be greater than the amount of its capital stock actually paid in; that it should, in addition to the fifty cents per share of its capital stock, pay annually fifty cents upon each one hundred dollars of its contingent fund; that it should be subject to all the limitations, conditions, and duties imposed upon it by the act of incorporation; that it should formally accept the terms of extension."
"every element of a contract between the state and the banks, and, with such a consideration as will uphold it, no reasonable doubt can be entertained that such was the purpose of the parties to it. . . . We are satisfied,"
"after a careful consideration of this question, that the parties making the contract never contemplated or intended that the act of 1856 should apply to this contract after its acceptance by the banks, and that such an acceptance was necessary to make the contract complete between the parties."
principle which the same court had previously laid down in Commissioners of Sinking Fund v. Green & Barren River Navigation Co., 79 Ky. 73, and Commonwealth v. Owensboro &c. Railroad, 95 Ky. 60, that a distinct contract contained in a charter was not subject to the act of 1856. Indeed, I do not understand upon what other theory a positive acceptance of the taxation imposed by the Hewitt Act was required of these banks.

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