Court Opinion

ID: 8002390
Source: CourtListenerOpinion
Date Created: 2022-09-09 01:50:22.855616+00
Date Added: 2024-06-11T16:35:45.880567
License: Public Domain

Wasnbr, Judge,
delivered the opinion of the court.
The question involved relates to the power of the State to assess, levy, and collect a tax on the property owned by the defendant in error. In 1853 the Legislature incorporated the Eliot Seminary, and provided that the incorporators, their associates and successors, should be constituted a body corporate and politic, by the name of The Eliot Seminary, and by that name should have perpetual succession, and be capable of taking and holding, by gift, grant, devise, or otherwise, and conveying, leasing, or otherwise disposing of, any estate, real, personal, or *316mixed, annuities, endowments, franchises, and other hereditaments which might conduce to the support of the said seminary or the promotion of its objects; that the property of the said corporation should be exempt from taxation; and that the sixth, seventh, and eighth sections of the first article of the act concerning corporations, approved March 19,1815, should not apply to it. (Adj. Sees. Acts 1853, p. 290.)
The Legislature, by an amendatory act in 1857, changed the name of The Eliot Seminary to that of The Washington University. (Adj. Sess. Acts 1857, p. 610.)
The seventh section of the general corporation law of 1845' provided that the charter of every corporation that should be-thereafter granted by the Legislature should be subject to altera^tion, suspension, and repeal, in the discretion of the Legislature.., When the law was passed granting the charter, there was no> express prohibition restraining the Legislature from exempting property from taxation; but by the present constitution it is-declared that “no property, real or personal, shall be exempt from taxation, except such as may be used exclusively for public schools, and such as may belong to the United States, to this State, to counties or to municipal corporations within this State.” In pursuance of this clause of the constitution, the Legislature passed a law for the assessment and collection of the revenue, by virtue of which the property of the defendant in error was subjected to taxation. It is now insisted that the charter was an irrepealable contract, and perpetually exempted the property of the corporation from taxation.
The charter is unusual and of marked peculiarity. There is no preamble to the act, and no limit to its duration or to the amount of property which it may hold. No obligations are cast upon the corporation; it stipulates for nothing, and agrees to give no consideration whatever for the extraordinary privileges thus granted. The intention was, we suppose, to establish an institution of learning, but there is nothing to prevent the corporation from accumulating and absorbing millions of wealth, and there is no corresponding obligation imposed to compel it to carry out any contemplated object. To determine correctly this question it is *317of the utmost importance that we arrive at a just conclusion in regard to the nature of the act. If it be indeed a contract, it must stand, and the State is bound by it, however inexpedient or injudicious it may have been when made. By the constitution of the United States no State can pass any law impairing the obligation of contracts. There is no prohibitory clause in the constitution which has given rise to more protracted litigation, and various and profound discussion, than the one above quoted. The counsel for the defendant in error has cited numerous adjudged cases from the decisions of the Supreme Court of the United States, and contends that they are conclusive and uncontrollable authority here. Tf they are upon the same point, and pass on the question presented in this case, they must be considered as decisive, for it appropriately belongs to that tribunal to put a final construction on the national constitution. It may be advantageous to examine some of the cases on this subject decided by the Supreme Court, of the United States, and compare them with the case rye are now considering, that we may ascertain what effect those decisions should have in ttye present instance.
The first case of this kind which came before ■ that court, and where the subject received a.very thorough discussion, was the celebrated one of Fletcher v. Peck, 6 Cranch, 87. There, the Legislature of Georgia, by an act of the 7th of January, 1796, authorized the sale of a large tract of wild land, and a grant was made by letters patent, in pursuance of the act, to a number of individuals, under the name of the Georgia Company. Fletcher held a deed from Peck for a part of this land, under a title derived from the patent, by which deed Peck had covenanted that the State of Georgia was lawfully seized when the act was passed, and had a good right to sell, and that the letters patent were lawfully issued, and that the title had not since been legally impaired. The action was for breach of covenant; and the breach assigned was that the letters patent were void, for that the Legislature of Georgia, by the act of the 13th of February, 1796, declared the preceding act to be null and void, as being founded in fraud and corruption. This directly brought before the court the question whether the Legislature of Georgia could constitutionally repeal *318the act of 1795 and rescind the sale made under it. The court declared that when a law was in its nature a contract, and absolute rights have vested under that contract, a repeal of the law could not divest those rights, nor annihilate or impair the title so acquired. A grant was a contract within the meaning of the constitution. The words of the constitution were construed to comprehend equally executory and executed contracts, for each of these contain obligations which are binding on the parties. A grant is a contract executed, and a party will always he held to be estopped by his own grant. A party cannot pronounce his own deed invalid, whatever cause may be assigned for its invalidity, even though that party be the Legislature of the State. It was accordingly held that the State of Georgia having parted from the estate of the land, and that estate having passed into the hands of a bona fide purchaser for a valuable consideration, that State was constitutionally disabled from passing any law whereby the estate of the plaintiff could be legally impaired and rendered void. No one could for' a moment entertain a doubt about that being a case of contract. The State of Georgia had sold the land for a valuable consideration, and conveyed it by deed to the purchasers. The title was actually vested in the grantees, and the contract executed. But had it been only executory, it would have been equally obligatory. Had the purchaser agreed at a future day to pay, and the State in consideration thereof agreed to convey the lands, there could have been very little dispute about its being a contract. The only questions involved in the case were, does the constitutional provision extend to contracts made by States ? and has a State, being a party to a contract, a right to declare that contract void, for fraud committed by its own government in the execution of that contract upon the rights of those it represented ?
The case of The State of New Jersey v. Wilson (7 Cranch, 164) is similar to that of Fletcher v. Peck in its principles. There, in consideration that the Delaware Indians released to the State of New Jersey their right to certain lands, the Legislature declared by law that other lands purchased for the Indians should not be subject to taxation. The Indians subsequently, with the consent of the Legislature, sold the lands thus acquired; and the Legisla*319ture, by subsequent enactment, imposed a tax on those lands. This was determined by the Supreme Court of the United States to be in violation of the contract made with the Indians, the benefits of which accompanied the title, and therefore void. Chief Justice Marshall, in delivering the opinion of the court, says: “ Every requisite to the formation of a contract is found in the proceedings between the then colony of New Jersey and the Indians. The subject ivas a purchase, on the part of the government, of extensive claims of the Indians, the extinguishment of which would quiet the title to a large portion of the province. A proposition to this effect is made, the terms stipulated, the consideration agreed upon, which is a tract of land with the privilege of exemption from taxation; and then, in consideration of the arrangements previously made, one of -which this act of assembly is stated to be, the Indians execute their deed of cession. This is certainly a contract clothed in forms of unusual solemnity.”
The question to he considered was, did the Legislature pass the act exempting the lands from taxation as an ordinary law, or was it a contract between the parties? It certainly possessed every element of a contract between parties making a mutual agreement. But had the Indians parted from nothing, and the Legislature enacted simply that their lands should be exempt from taxation, would that have constituted a contract, and could not a subsequent Legislature have repealed the statute and imposed a .tax upon the land? I think nothing could be plainer. The Legislature cannot, by declaring an act perpetual, render it so.
An act, without any consideration passing between the parties, providing that lands never should he taxed, would have only the force and effect of an ordinary law simply exempting them from taxation, which might he repealed by any subsequent Legislature.
The case of Dartmouth College v. Woodward (4 Wheat. 518) is a leading case, and is usually cited as containing a most full and elaborate discussion of the principles contended for in this case. In the investigation of the Dartmouth College case, the inhibition on the States to impair by law the obligation of contracts received the most thorough and exhaustive examination, and the great influence of the authoritative adjudication then made has remained *320unimpaired to the present day. Dartmouth College was incorporated by a charter from the King of Great Britain, in 1769. The Legislature of New Hampshire, by act of assembly, undertook to vary the charter in- essential points; to institute a number of additional visitors; and, in fact, to exercise a complete control over it. Marshall, C. J., declares that “ the charter was a contract to which the donors, the trustees of the corporation, and the crown, were the original parties, and it was made on a valuable consideration for the security and disposition of property.” The act of the State there, which was complained of, transferred the Avhole power of governing the college from the trustees appointed in accordance with the will of the original founder, as expressed in the charter, to the Executive of New Hampshire. The charter was reorganized so as to entirely wrest the corporation from the management and control of the trustees appointed according to the will of the original founders, and converted it into a machine wholly subservient to the State government. This, of course, was entirely subversive of the contract under which the donors invested their property.
In Gordon v. Appeal Tax Court, 3 How. 133, it was held that where the Legislature of a State accepted from banking corporations a bonus as a consideration for the franchise granted, and pledged the faith of the State not to impose any further tax or burden upon them during the continuance of their charters under the act, a tax upon the stockholders, by reason of their stock, was a violation of the contract, and illegal. The same point was ruled in the series of cases growing out of the laws of Ohio creating their banking system.
In 1845 the Legislature of Ohio passed a general banking law, the fifty-ninth section of which required the officers to make semiannual dividends; and the sixtieth required them to set off six per cent, of such dividends for the use of the State, which sum or amount so set off should be in lieu of all taxes to which the company or the stockholders therein would otherwise be subject. In 1851 an act was passed entitled “ An act to tax banks, and bank and other stocks, the same as property is now taxable by the laws of this State.” The operation of the latter law was to increase *321the tax. The Supreme Court of Ohio upheld the law, and declared in favor of its validity, but the Supreme Court of the United States reversed the decision of the State court, on the ground that the first law was a contract founded on a consideration, and that it could not be violated. (Piqua Branch of the State Bank of Ohio v. Knoop, 16 How. 369; Dodge v. Woolsey, 18 How. 331.) The Supreme Court of Ohio refused to follow the above decisions, and the question was again brought before the national tribunal, where the prior rulings were affirmed, and it was distinctly announced that a State, in chartering a corporation, might, in express terms, and for a consideration, contract that the corporation should be exempt from taxation, and that a contract so made was protected from subsequent legislation. (Jefferson Branch Bank v. Skelly, 1 Black, 436.)
In all the cases decided by the Supreme Court of the United States, from thq very earliest period down to the two recent decisions of Bridge Prop. v. Hoboken (1 Wall. 116), and the Binghampton Bridge (3 Wall. 52), it is believed a valid consideration was paid in every instance in which we find judgments of that court invalidating a law of the State intended to abrogate a right vested under a previous statute. The right of taxation, like the right of eminent domain, is a high prerogative of sovereignty, and ought never to be surrendered. “ That the taxing power is of vital importance,” said Chief Justice Marshall, in the case of the Providence Bank v. Billings, 4 Peters, 561-2, “that it is essential to the existence of government, are truths which it can not be necessary to reaffirm. They are acknowledged and asserted by all. It would seem that the relinquishment of such a power is never to be assumed. We will not say that a State may not relinquish it; that a consideration sufficiently valuable to induce a partial release of it may not exist; but as the whole community is interested in retaining it undiminished, that community has a right to insist that its abandonment ought not to be presumed in a case in which the deliberate purpose of the State to abandon it does not appear.” And again: “ The power of legislation, and consequently of taxation, operates on all persons and property belonging to the body politic. This is an original princinle, which has its foundation in society itself. It is granted by *322all, for tlie benefit of all. It resides in government as a part of itself, and need not be reserved when property of any description, or the right to nse it in any manner, is granted to individuals or corporate bodies. However absolhte the right of an individual may be, it is still in the nature of that right that it must bear a portion of the public burdens, and that portion must be determined by the Legislature.”
In Brewster v. Hough (10 N. H. 139) the court denies absolutely that the State, acting through its Legislature, can surrender any portion of the taxing power. The Judge remarks: “The power of taxation is essentially a power of sovereignty or eminent domain, and it may well deserve consideration whether this power is not inherent in the people under a republican government, and so far inalienable that no Legislature can make a contract by Which it can be surrendered without express authority for that purpose in the constitution, or in some other way leading directly from the people themselves.” This case was referred to and received the unqualified assent of Mr. Justice Daniel in his dissenting opinion in the Piqua Branch, etc., v. Knoop. Professor Greenleaf, under the head of franchise, in his edition of Cruise, notices the case of Brewster v. Hough, and observes : “In regard to the position that the grant of a franchise of a ferry, bridge, turnpike, or railroad, is in its nature exclusive, so that the State cannot interfere with it by the creation of another similar franchise tending materially to impair its value, it is with great deference submitted that an important distinction should be observed between those powers of government which are essential attributes of sovereignty, indispensable, to be always preserved in full vigor—such as the power to create revenue for public purposes, to provide for the common defense, to provide safe and convenient ways for the public necessity and convenience, and to take private property for public uses, and the like — and those powers which are not thus essential, such as the power to alienate the lands and other property of the State, and to make contracts of service, or of purchase and sale, or the like. Powers of the former class are essential to the constitution of society, as without them no political community can well exist, and necessity requires *323that they should continue unimpaired. They are intrusted to the Legislature to be exercised, not to be bartered «away, and it is indispensable that each Legislature should assemble tyith the same measure of sovereign power which was held by its predecessors. Any. act of the Legislature disabling itself from .the future exercise of power intrusted to it for the public good must be void, being in effect a covenant to desert its paramount duty to the whole people.” (3 Greenleaf’s Cruise, tit. 27, § 29, note.)
It is an admitted principle in our republican government that one Legislature cannot in any manner abridge or lessen the power of a succeeding Legislature. Each is alike invested with the general power of sovereignty. Therefore one Legislature cannot pass a law irrevocable or irrepealable in its character unless it has imparted to it something in the nature of a compact or contract which will preserve it inviolate under the inhibition of the national constitution. A law which seeks to deprive the Legislature of this inherent and vital principle of sovereignty — the power of taxation — must be so clear, explicit, and determinate, that there can be neither doubt nor controversy about its terms or the consideration which renders it binding. Every presumption will be made against its surrender, as the power was committed by the people to the government to be exercised, and not to be alienated. (The People v. Roper, 35 N. Y. 629; Mott et al. v. The Penn. R.R. Co., 6 Casey, 9; Commonwealth v. Bird, 12 Mass. 442.)
Because the Legislature sees fit to grant certain privileges and immunities to a person, it does not follow that they are to be perpetual, and that the law cannot be repealed. The legislative power may enact that an informer shall have a certain interest in a penalty, yet, after information given, the law may be repealed and his interest will be destroyed. (10 Wheat. 248; 6 Pet. 404.) The Legislature may, if there is no prohibition in the organic law to the contrary, exempt certain species of property from taxation, yet they would be. at liberty at any time to repeal the exemption and again subject it to the burdens of government. This power ought not to be questioned or doubted; but the opinion seems to prevail with some minds that the right of property is more sacred in chartered corporations than the same right is in the person of *324the citizen — a doctrine which I regard as wholly fallacious and indefensible. It is a noticeable fact that in earlier days the courts were strongly in favor of corporations, and the reason was obvious—they were few, a strong prejudice existed against them, the Legislatures were constantly encroaching upon them, and they required protection. Now the reverse is true. They have become so numerous and powerful'that they overshadow almost everything in the land; nearly every man is some way interested in them, and the Legislature needs protection against their exactions, demands, and importunities. Had the grant exempting the property of the defendant in error from taxation been made to an individual in the same terms, I do not think it would be for a moment contended that the grant was not repealable, aiid that the State did not possess the unquestioned right to resume the taxing power at pleasure. Can it make any difference because it was made to a corporation ? It seems to me that the case of Christ Church v. Philadelphia (24 How. 300) is entirely similar in principle to the case at bar, and conclusive authority — where it was held that an exemption from taxation contained in the charter of a corporation granted by the State was in its nature durante, bene plácito, and revocable by subsequent act. It appears from the report that, in the year 1833, the Legislature of Pennsylvania-passed an act which recited “ that Christ Church Hospital, in the city of Philadelphia, had for many years afforded an asylum to numerous poor and distressed widows who would probably else have become a public charge; and, it being represented that in consequence of the decay of the buildings of the hospital estate, and the increasing burdens of taxes, its means were curtailed and its usefulness limited,” they enacted “ that the real property, including ground rents, now belonging and payable to Christ Church Hospital, in the city of Philadelphia, so long a-s the same shall continue to belong to the said hospital, shall be and remain free from taxes.”
In the year 1851 the same authority enacted 11 that all property, real and personal, belonging to any association or incorporated company which is now by law exempt from taxation, other than that which is in the actual use and occupation of such association *325or incorporated company, and from which an income or revenue is derived by the owner thereof, shall hereafter be subject to taxation in the same manner and for the same purposes as other property is now by law taxable, and so much of any law as is hereby altered and supplied be and the same is hereby repealed.” It was decided in the Supreme Court of Pennsylvania that the exemption conferred upon the plaintiffs by the act of 1833 was partially repealed by the act of 1851, and that an assessment of a portion of their real property under the act of 1851 was not repugnant to the constitution of the United States as tending to impair a legislative contract which they alleged to be contained in the act of Assembly of 1833. The United States Supreme Court say: “The plaintiffs claim that the exemption conceded by the act of 1833 is perpetual, and that the act itself is in effect a contract. This concession of the Legislature was spontaneous, and no service or duty or other remunerative condition was imposed on the corporation. It belongs to the class of laws denominated privilegia favorabilia. It attached only to such real property as belonged to the corporation and while it remained as its property; but it is not a necessary implication from these facts that the concession is perpetual or was designed to continue during the corporate existence.” And it is further added: ‘fit is in the nature of such a privilege as the act of 1833 confers that it exists bene placitum, and may be revoked at the pleasure of the sovereign.” This decision was made by an unanimous bench, subsequent to the Ohio case in which three judges dissented, and shows most clearly that a grant of the nature of the one which we are now -considering was not regarded in the light of a contract.
No importance or weight can be attached to that provision of the charter of defendant in error which excludes it from the operation of the seventh section of the general law in relation to corporations. It is incompetent, as before observed, for one Legislature to attempt to derogate from the power or tie up the hands of a subsequent Legislature. For an irrepealable contract of the character here presented no authority or precedent is to be found. Whilst the exemption continued, the property was free from taxa*326tion; but when the law Ayas repealed, it then fell back in the general mass — liable, like all other property, for the burdens of government. It has been truly .said that “in a representative democracy the right of taxing the citizen is an inseparable incident of popular sovereignty.” And this right must be preserved unimpaired in order that the revenue ‘ and burdens necessary to support the government be not unequally distributed or onerously imposed on any particular class. The rights and obligations o£ the Citizen and the government are mutual and correlative; the one owes the duty of allegiance, the other of protection. Whilst protection is held out and extended, the necessary support for the government must be furnished. Giving away the taxing power in perpetuity inevitably tends to the destruction of the State. If ten millions can be released in one day, one hundred millions may be released in another and, the principle being once established, the process might go on till every resource of revenue was gone. Although the taxing poAver is but an incidental one, to be exercised as the means of performing governmental functions, it is nevertheless a branch of the legislative power, which always, in its nature, implies not only the power of making laAvs, but of altering and repealing them as the exigencies of the State and circumstances of. the times may require. (Rutherford’s Inst, of Nat. LaAV, book 3, ch. 3, § 3.)
When the charter of the University was granted, the Legislature might have considered it reasonable to foster and encourage it in its infancy and confer upon it privileges and immunities while struggling into existence. But no provision is made in express terms, or by reasonable intendment, that those immunities should be perpetual and have the effect of Avithdrawing millions of subsequently acquired property from taxation. In 1853 taxes were light and the State debt was small, and exemptions could be made without great detriment. After that period the State embarked in a false and ruinous system of loaning its credit to corporations, by which it incurred an immense debt; then followed the civil Avar, which increased, its already burdensome obligations, and taxation became exceedingly onerous.
In this condition of things it Avas deemed the part of wisdom *327to make all property within the jurisdiction of the State, receiving the benefit of her laws and protection, contribute its proper proportion and share the common burdens. This was entirely a matter resting in the sound discretion of the legislative branch of the government, and we have been unable to find any objection to their exercise of the power.
The judgment will be reversed and the petition dismissed.
The other judges concur.