sustained, regardless of the consideration paid therefor and even though such consideration was the surrender of a valid charter exemption.97 It has been held, however, that a constitutional prohibition against exemptions from taxation does not apply to a quasi public corporation, like a railroad company, for example.98 But before a grant of exemption from taxation in the charter of a corporation can take effect, the corporation must accept the charter; and it has been held, therefore, that a grant of exemption in the charter of a corporation is revoked by the adoption of a constitutional prohibition against such exemptions before the first meeting for the purpose of organiz ing the corporation.99 § 4634. Consideration for grant of exemption. In order for the state to be bound by a grant of exemption from taxation, there must be a consideration therefor. Of the sufficiency of the consideration, however, the legislature is the exclusive judge.2 There is a sufficient consideration if the exemption is granted in the charter of the corporation, or in a general law in force at the time the charter is granted and accepted, for the corporation furnishes a consideration in assuming the duties and obligations imposed by the charter, and presumably the state receives a consideration therefrom. So, the public purposes to be attained by an educational institution constitute the consideration for the grant to it of an ex 97 Memphis & C. R. Co. v. Gaines, 97 U. S. 697, 24 L. Ed. 1091. 98 Yazoo & M. Val. R. Co. v. Board of Levee Commissioners, 37 Fed. 24. In this case it was held that a constitutional provision that the property of all corporations for pecuniary profit shall be subject to taxation the same as the property of individuals, and that taxes shall be equal and uniform, applies only to corporations which are purely private, and does not prevent the legislature from granting an exemption from taxation to a quasi public corporation, like a railroad company. 99 Planters' Fire & Marine Ins. Co. v. Tennessee, 161 U. S. 193, 40 L. Ed. 667. 1 In order for a legislative act granting an exemption to be a contract, there is the same necessity 2The motives or consideration which induced a sovereign state to make a contract, cannot be inquired into as effecting the validity of the act." Piqua Branch of State Bank v. Knoop, 16 How. (U. S.) 369, 14 L. Ed. 977. 3 Tomlinson v. Jessup, 15 Wall. (U. S.) 454, 21 L. Ed. 204; Washington University v. Rouse, 8 Wall. (U. S.) 439, 19 L. Ed. 498; Dodge v. Woolsey, 18 How. (U. S.) 331, 15 L. Ed. 401. "The exemption [from taxation] is presumed to be on sufficient consideration, and binds the state if the char 1 emption from taxation. Again, the benefit to the community arising out of the objects for which a charitable corporation is created is sufficient consideration for the grant to such corporation of an exemption from taxation.5 The state may also receive a consideration for an exemption from taxation granted after the corporation has been created, as where a corporation accepts an amendment of its charter binding it to pay a certain sum, or perform certain services, in lieu of taxation. An exemption from taxation, says the Federal Supreme Court, "is upheld as being made upon considerations moving to the state which give to the transaction the character of a contract. It is thus that it is brought within the protection of the Federal Constitution. In the case of a corporation the exemption if originally made in the act of incorporation, is supported upon the consideration of the duties and liabilities which the corporators assume by accepting the charter. When made * by an amendment to the charter, it is supported upon the consideration of the greater efficiency with which the corporation will thus be enabled to discharge the duties originally assumed by the corporators to the public, or of the greater facility with which it will support its liabilities and carry out the purposes of its creation.”7 § 4635. Grant of exemption as bounty. The promise of an exemption from taxation, which, had it been made by one individual to another, would have been a nudum pactum, is of no higher character because one of the parties is a state and the other a corporation and because the promise is contained in a statute.8 An exemption which does not constitute a contract but is "a spontaneous concession by the legislature, not connected with any service. or duty imposed upon the corporation" is subject to modification. or repeal. In other words, a state may, at its pleasure, withdraw an exemption which is a mere gratuity possessing no element ter containing it is accepted." Home of the Friendless v. Rouse, 8 Wall. (U. S.) 430, 19 L. Ed. 495. 4 Washington University v. Rouse, 8 Wall. (U. S.) 439 note, 19 L. Ed. 498. 5 Home of the Friendless v. Rouse, 8 Wall. (U. S.) 439, 19 L. Ed. 495. 21 L. Ed. 204; Com. v. Pottsville Water Co., 94 Pa. St. 516. 7 Tomlinson v. Jessup, 15 Wall. (U. S.) 454, 21 L. Ed. 204. 8 Tucker v. Ferguson, 22 Wall. (U. S.) 527, 22 L. Ed. 805. 9 People v. Commissioners of Taxes & Assessments of City & County of New York, 47 N. Y. 501, 503. of a contract,10 even though the corporation may have incurred expense upon the faith thereof.11 Where the statutory promise of exemption was not based on any consideration but was wholly gratuitous and the railroad company to which it was made was not required to do anything, and as a matter of fact did nothing in return therefor, the benefit of such promise was available to the company only until the legislature chose to revoke the promise which in such circumstances was not a contract and as such protected from impairment.12 So, a statute passed after a corporation has been created, and exempting it wholly or partially from taxation, without the payment of any consideration or the assumption of any new burden by the corporation, is a mere gratuity on the part of the state, and the exemption may be revoked at any time.13 Even though an exemption statute is in force when a corporate charter is granted and accepted, the exemption may be revoked if it is nothing more than a bounty. Thus, a statute, offering to all cor porations formed and to be formed for the purpose of boring for water and manufacturing salt therefrom in the state, and to any and all individuals engaged or engaging in such manufacture, exemption from taxation of all property, real and personal, used for such purpose and also a money bounty for every bushel of salt so manufactured, is a mere bounty law and not a contract in such a sense that it cannot be repealed at the pleasure of the legislature.14 So statute providing that all property, real and personal, of a value over a fixed sum which may subsequently be actually employed within the limits of the legislating jurisdiction for manufacturing purposes, shall be exempt from all general taxes for a designated period of years is not a contract in the sense that it cannot be repealed, but is a mere bounty law which may be repealed at any time.15 10 West Wisconsin Ry. Co. v. Supervisors of Trempealeau County, 93 U. S. 595, 23 L. Ed. 814. 11 Grand Lodge of State of Louisiana. v. New Orleans, 166 U. S. 143, 41 L. Ed. 951. 12 Tucker v. Ferguson, 22 Wall. (U. S.) 527, 22 L. Ed. 805. 13 Wilmington & W. R. Co. v. Alsbrook, 146 U. S. 279, 36 L. Ed. 972, aff'g 110 N. C. 137, 14 S. E. 652; West Wisconsin Ry. Co. v. Trempealeau County Sup'rs, 93 U. S. 595, 23 L. Ed. 814; Tucker v. Ferguson, 22 A § 4636. Impairment of contract of exemption-In general. corporate charter is a contract within the meaning of the clause of the Federal Constitution which prohibits the impairment of the obligations of contracts by the states, and cannot be materially altered without the consent of the corporation.1 16 'Nor does it make any difference [as far as the contract nature of a corporate charter is concerned] that the uses of the corporation are public, if the corporation itself be private. The contract is equally protected from legislative interference, whether the public be interested in the exercise of its franchise or the charter be granted for the sole benefit of its corporators." 17 And when exemption from or limitation on taxation is contained in such charter, it is a part of the contract and is inviolate to the same extent as its other obligations.18 So it has 16 Dartmouth College v. Woodward, 4 Wheat. (U. S.) 518, 4 L. Ed. 629. "That the charter of a private corporation is a contract between the state and the corporators, and within the provision of the Constitution prohibiting legislation impairing the obligation of contracts, has been the settled law of this court since the decision in the Dartmouth College case." Minot v. Philadelphia, W. & B. R. Co. (The Delaware Railroad Tax), 18 Wall. (U. S.) 206, 21 L. Ed. 888. That the charter of a private corporation is a contract between the state and the corporators and, as such, protected from impairment by the Federal Constitution "has been so often decided, that its statement is only the repetition of an admitted legal principle." Maine Cent. R. Co. v. Maine, 96 U. S. 499, 24 L. Ed. 836. A full discussion of this question is contained in Chap. 57, concerning the Amendment or Repeal of Charters. 17 Minot v. Philadelphia, W. & B. R. Co. (The Delaware Railroad Tax), 18 Wall. (U. S.) 206, 21 L. Ed. 888. "A grant of the power of taxation, by the legislature of a state [to a township], does not form such a contract between the state and the township as is within the protection of the provision of the Constitution of the United States which forbids the passage by a state of law impairing the obligation of contracts. The conferring of such right of taxation is an exercise by the legislature of a public and governmental power. It is the imparting to the township of a portion of the power belonging to the state, which it can lawfully impart to a subordinate municipal corporation. But, from the very character of the power, it cannot be imparted in perpetuity, and is always subject to revocation, modification, and control by the legislative authority of the state. The authorities to this effect are uniform." Hence, the exemption of property which, it has been antecedently provided, shall "at all times hereafter" be taxable by the township does not impair the obligation of a contract. Williamson v. New Jersey, 130 U. S. 189, 32 L. Ed. 915. 18 Minot v. Philadelphia, W. & B. R. Co. (The Delaware Railroad Tax), 18 Wall. (U. S.) 206, 21 L. Ed. 888. See also Pacific R. Co. v. Maguire, 20 Wall. (U. S.) 36, 22 L. Ed. 282; Humphrey v. Pegues, 16 Wall. (U. S.) 244, 21 L. Ed. 326. been held that, where all the property of a college has been exempted from taxation forever, a statute limiting the exemption to the property in immediate use by it is void,19 and that, where it is stipulated in the charter of a bank or any other corporation that it shall pay a certain tax, and that this tax shall be in lieu of all other taxes, the state cannot afterwards impose a greater or different tax.20 The constitutional prohibition against the impairment of the obligation of contracts only applies, however, where it is claimed that the obligation of a contract is impaired by a law of the state, a statute or constitutional provision of the state. It does not apply to mere decisions of state courts construing a contract.21 The constitutional prohibition, therefore, is not violated by a decision of a state court that a law, exempting from taxation does not apply to particular property.22 Where a contract of exemption from taxation between a city and a waterworks company was declared void by the highest as it has been repeatedly held that it may do, the stipulation cannot subsequently be withdrawn, and the property subjected to taxation. The provision which secures the inviolability of contracts against state legislation stands as a perpetual interdiet against the imposition of the charge. It is to no purpose in such case to speak of the power of taxation as an attribute of state sovereignty which cannot be surrendered; that sovereignty, whatever its extent, must be exerted in subordination to the prohibition of the Constitution, which is the supreme law of the land. Many of the attributes of sovereignty which the states would possess if independent political communities, have been in like manner surrendered to the federal government, such as the power to declare war, to make peace, to enter into treaties of alliance, and to regulate commerce with foreign nations. The question in all cases presented to a federal court, where complaint is made of a tax levied by the states, is whether there is any inhibition, express or implied, in the Constitution of the United States upon the imposition of the tax. If there be, it is the duty of the court to enforce the inhibition; it matters not whom its decision may affect, nor how great and irresponsible the power of the state may be independently of such prohibition.'' County of San Mates v. Southern Pac. R. Co. (Railroad Tax Cases), 13 Fed. 722, 732. 19 Northwestern University v. People, 99 U. S. 309, 25 L. Ed. 387. 20 Dodge v. Woolsey, 18 How. (U. S.) 331, 15 L. Ed. 401. See also Farrington v. Tennessee, 95 U. S. 679, 24 L. Ed. 558; Piqua Branch of State Bank v. Knoop, 16 How. (U. S.) 369, 14 L. Ed. 977; Franklin County Court v. Deposit Bank of Frankfort, 87 Ky. 370, 9 S. W. 212; State v. Butler, 86 Tenn. 614, 8 S. W. 586. 21 St. Paul, M. & M. R. Co. v. Todd County, 142 U. S. 282, 35 L. Ed. 1014; New Orleans v. New Orleans Water Works Co., 142 U. S. 79, 35 L. Ed. 943; New Orleans Waterworks Co. v. Louisiana Sugar Refining Co., 125 U. S. 18, 31 L. Ed. 607; Mississippi & M. R. Co. v. Rock, 4 Wall. (U. S.) 177, 18 L. Ed. 381. 22 St. Paul, M. & M. R. Co. v. Todd County, 142 U. S. 282, 35 L. Ed. 1014. |