twenty-first day of August, in the same year, | senior partner of the debtor firm individually he made a voluntary assignment of all his prop- can maintain the present suit to recover back erty, real and personal, in trust for his credit- the money paid to the respondents by the debtors, under the laws of the State. or firm.

Subsequent disclosures made known to some extent the secret arrangement between the appellants and the insolvent debtors, and thereupon certain creditors of the latter petitioned the proper district court that the senior partner of the debtor firm might be adjudged a bankrupt, Waiving the first two errors assigned, the sinalleging for cause, among other things, the pref-gle question presented for decision, is whether erential payment made to the appellant, as one the complainant, as the assignee of the estate of of the acts of bankruptcy committed by the in- an individual partner of a debtor copartnersolvent debtor. Pursuant to that petition, the ship, can maintain a suit to recover back money senior partner of the debtor firm was adjudged previously paid to a creditor of the copartnera bankrupt. ship, upon the ground that the money was paid to such creditor in fraud of the other creditors of the firm and in fraud of the provisions of the Bankrupt Act.

the separate estate in competition with the sep- | Ch., 60; Barker v. Goodair, 11 Ves., 86; Smith arate creditors. McLean v. Johnson, 3 McLean. v. Stokes, 1 East, 367; Parker v. Muggridge, 2 202. Story, 348. Doubt upon that subject cannot be enter- Assets are to be marshaled between the credit tained, and it is equally clear that a solvent ors of the copartnership and the separate creditpartner cannot prove his own separate debt ors of the partners only when there are partagainst the separate estate of the bankrupt partnership assets and separate assets of individual ner, so as to come in competition with the joint partners, and proceedings have been instituted creditors of the partnership, for the plain reason against the partnership and the individual memthat he is himself liable to all the joint creditors, bers, as provided in the 36th section of the Bankwhich is sufficient to show that in equity he rupt Act. Ex parte Leland, 5 Nat. Bk. Reg., cannot be permitted to claim any part of the 222; Ex parte Downing, 1 Dill., 36. funds of the bankrupt before all the creditors to whom he is liable are fully paid. Emery v. Bk., 7 Nat. Bk. Reg., 217.

obligation, as the liability, if it exists, is to another party; nor would a judgment in this case, even if satisfied, be a bar to a subsequent suit in the name of the partnership or their duly appointed assignees.

2. But when the State, proceeding in the execution of the trust, had transferred its entire title to a railroad company, and it had perfected its title and acquired the right to sell, the lands were subject to taxation. Liability to taxation is an incident to all real estate. Exemption is an exception. When claimed, to be effectual, it must be clearly made out.

3. A state Act imposing a tax with reference to the railroad itself, does not impose a tax upon the lands owned by the company not used nor necessary in operating the road.

Two principal suggestions are made in support of the theory set up by the appellants: (1) That all the parties concerned in the attempt to effect a compromise between the debtors and their creditors proceeded as if the copartnership 4. A provision in a state Act, exempting the lands had previously been dissolved and as if the as- specified from local taxation for three years, was not a contract. There was no consideration. It sets and effects of the debtor firm had been was the promise of a gratuity spontaneously made, placed in the hands of the senior partner in trust which might be kept, changed or recalled at pleasto settle up the affairs of the debtors with their ure.. creditors and to pay the compromise notes. (2) 5. The taxing power may be restrained by conThat the other partner never assented to the 6. Where the contract exists, it is to be rigidly compromise agreement nor was he, in fact, a par- scrutinized and never permitted to extend, either ty to the final arrangement, and that the copart-in scope or duration, beyond what the terms of the concession clearly require. nership name was signed to the compromise agreement and to the notes without his author- Argued Feb. 18, 1875. ity.

Issuable matters are certainly involved in

those propositions, but suppose they are fully proved, they are not sufficient to show that the other partner ever conveyed his interest in the assets and effects of the copartnership to the bankrupt partner, or that he ceased to be a joint owner of the same when the estate of the bankrupt partner was assigned and conveyed to the complainant below as his assignee. Harrison v. Sterry, 5 Cranch, 302.

Nothing is exhibited in the record to warrant the conclusion that the copartnership was ever in fact dissolved before the decree in bankruptcy against the senior partner, and as the compromise notes were given in the name of the copartnership, the other partner remained liable for their payment.

Decree reversed and the cause remanded, with directions to dismiss the bill of complaint.

Cited 7 Biss., 323, 334: 3 Biss., 128; 9 Ben., 228; 15 Bk. Reg., 64, 136, 188; 16 Bk. Reg., 528; 17 Bk. Reg., 151; 1 Hughes, 201; 2 Low., 515; 67 Me., 144; 24 Am.

Rep., 18.

CHARLES R. TUCKER ET AL., Appts.,

v.

NELSON FERGUSON ET AL.

(See S. C., 22 Wall., 527-576.)

tract in special cases for the public good.

gan.

[No. 364.]

Decided Mar. 1, 1875.

States for the Western District of Michi

PPEAL from the Circuit Court of the United

The history and facts of this case are fully stated by the court.

Messrs. J. S Black, Titian J. Coffey, William L. Webber, M. J. Smiles and W. Darwin Hughes, for appellants:

The State cannot tax the national domain.nor restrain nor interfere with the power of Congress to transfer it as it pleases, nor deprive the grantees of any rights under the national grants.

Gibson v. Chouteau, 13 Wall., 92 (80 U. S., XX., 534); Brewer v. Kidd, 23 Mich., 440.

Under this uncontrolled power, Congress granted these lands to the State for the specific and exclusive purpose of aiding in the construction of these railroads; for that use and purpose only; to be disposed of only as the work progressed; to be applied to no other purpose whatsoever; to be subject to the disposal of the Legislature, for the purpose aforesaid; to be disposed of by said State only in manner following. By such careful iteration is the grant limited to the express purpose.

To enforce this purpose the penalty is added, that "If any of said roads are not completed within ten years, no further sales shall be made, and the lands unsold shall revert to the United States."

By Act of Feb. 17, 1865, 13 Stat. at L., State taxation of lands granted to railroads-569, and again by Act of Mar. 3, 1871, 16 Stat. when allowable-tax on railroad-provisions exempting from tax-contract to restrain taxa

tion.

1. Where the United States granted lands to a State to aid in the construction of railroads and the State accepted the grant, it could not tax the lands while the title remained in the United States, nor while it held them as the trustee of the United States.

NOTE.-Exemption from taxation; whether a contract or not; not implied.

A statute exempting from taxation the property which should thereafter be given for the support of the ministry of the gospel, is in the nature of a contract, which the State cannot rescind or impair. Atwater v. Inhab. of Woodbridge, 6 Conn., 223: S. C., 16 Am. Dec., 46; Parker v. Redfield, 10 Conn., 495; Osborne v. Humphrey, 7 Conn., 339; Landon v. Litchfield, 11 Conn., 260.

These decisions were re-examined, and it was decided: 1. If the contract was with the grantor, the grantee was not privy to it. 2. If the contract was with the grantee, there was no consideration for it.

at L., 582, Congress granted to the Flint and Père Marquette Company further time for completion, and extended the time of reversion until Mar. 3, 1876, a direct exercise of national control, yet maintained, and requested by the State, by Resolution of Feb. 16, 1871.

This railroad, although its work of construction has progressed is not yet completed. If not

| 3. That the exemption was a mere gratuity, and is not a contract. Lord v. Town of Litchfield, 36 Conn., 118; S. C., 4 Am. Rep., 41; First Eccl. Soc. of Hartford v. Hartford, 38 Conn., 286.

The Legislature passed an Act exempting from taxation all property used for the purpose of manufacturing salt, and offering a bounty of ten cents per bushel for salt manufactured in the State. Two years later, the Act was amended by limiting the exemption from taxation to five years. It was held that the Act was not in the nature of a contract, and could be amended or repealed at any time. East Saginaw Mfg. Co. v. City of East Saginaw, 19 Mich., 259; S. C., 2 Am. Rep., 82.

fully completed at the time named, the lands | v. Brown, 1 Swanst., 265; Atty-Gen. v. Heelis, to which the right to sell shall not then have 2 S. & St., 67; Atty-Gen. v. Dublin, 1 Bligh., attached revert. N. S., 337; Atty-Gen. v. Carlisle, 2 Sim., 437; Atty-Gen. v. Shrewsbury, 6 Beav., 220; Hill, Trusts, 453.

These provisions show that Congress intended to grant the lands to the State, neither in independent ownership, nor for the sole benefit of the State, but in trust to secure the building of railroads which would open the public lands to market, give the government improved transportation and mail facilities, and promote settle ment and development.

The grant, then, was conditional, on the execution of certain trusts of benefit to the grantor and of joint benefit to the grantor and grantee, with a reserved right of reversion in a certain event. This, of necessity, implies an interest in the United States until the conditions of the grant are completely fulfilled.

Taxation is a sovereign power which cannot co-exist with this higher interest in the United States, and can only attach when that interest is finally extinguished.

Taxation is a direct method of defeating the trust, since it involves the power of sale for non-payment of taxes, which, if the taxes be valid, sweeps away all prior titles and trusts.

Rice v. Railroad Co., 1 Black, 378 (66 U. S., XVII., 153); Ill. Cent. R. R. Co. v. McLean Co., 17 Ill., 291; People v. Auditor-Gen., 7 Mich., 84; see, also, Kansas Indians, 5 Wall., 737 (72 U. S., XVIII., 667); New York Indians, 5 Wall., 761 (72 U. S., XVIII., 708); Railway Co. v. Prescott, 16 Wall., 603 (83 U. S., XXI., 373). Although we do not assert that this trust to a State is a charity, under the Statute of 43 Eliz., ch. 4, we claim that it is of the class of trusts enumerated in the preamble of that statute, as charitable uses, and should be treated in equity on the same principle.

Among the uses enumerated in the preamble to the statute, are gifts, etc., for schools of learning, free schools, repairs of bridges, forts, causeways, sea-banks, highways, etc. Gifts for promoting public works for the convenience or benefit of the public are considered as charitable

uses.

In Atty-Gen. v. Heelis, 2 Sim. & St., 67-76, Sir J. Leach, V. C., said that the funds supplied from the gift of the Crown, or from the gift of the Legislature, or from private gift, or for any legal purpose or general purpose, are charitable funds, to be adininistered by courts of equity. And it is not material that the particular public service is not expressed in the Statute of Elizabeth, if it come within the equity of the statute.

In Witman v. Lex, 17 Serg. & R., 90, Ch. J. Gibson says that, although the Statute of Elizabeth is not in force, yet the principles which chancery has adopted in the application of the statute to particular cases obtain here as part of the common law. And he adds: "Not founding our jurisdiction on the statute, we are not bound, like the English courts, to restrain it in cases specifically enumerated in the preamble."

If the particular charitable purposes be clearly defined by the trust, they must be strictly carried out by the trustee, and any application of the property to a different object will be held a breach of trust.

Hill, Trust., 466.

The State, as trustee of the United States retained and, as to roads yet uncompleted or vet unpaid for, of which the Flint and Père Marquette Railroad is one, still retains an interest in and supervision and control over the lands yet unsold, which are essential until the trust is finally executed by the sale of the lands and the application of their proceeds in payment of the cost of construction; and this interest and control utterly negative any right to tax them as lands in private ownership are taxed.

1. By the Act of Congress of June 3, 1856, the grant was to the State and was to be held by it.

2. By the Act of Feb. 14, 1857, the State accepted the grant and assumed control of the Howse v. Chapman, 44 Ves., 542; Atty-Gen. | land. Although it therein granted and con

If an exemption from taxation exists, it must be the result of a deliberate intention to relinquish this prerogative of sovereignty, distinctly manifested. Easton Bk. v. Com., 10 Pa. St., 450: People v. Mayor, etc., of N. Y., 32 Barb., 113; Ill. & Mich., Can. Co. v. C. & R. I. R. R. Co., 14 Ill., 321.

The imposition, modification and removal of taxes and the exemption of property from such burdens, is an ordinary exercise of the power of state sovereignty. There is no pledge, unless clearly expressed, that the power of taxation will not be exercised. Exemption from taxation should never be assumed unless the language used is too plain to admit of doubt. Gilman v. Sheboygan, 67 U. S. XVII., 305; Ohio L. Ins. & T. Co. v. Debolt, 57 U. S. (16 How.), 435.

No surrender of the general power of taxation by any legislative Act can be implied. Erie Ry. Co. v. Com., 66 Pa. St., 84; S. C., 5 Am. Rep., 351.

Exemption from taxation exists from the favor and may be revoked at the pleasure of the sovereign. Christ's Ch. v. Phila., 65 U. S., XVI., 602.

A State may irrevocably limit itself to a particular rate of taxation only. Gordon v. Appeal Tax Court, 44 U. S. (3 How.), 133; Piqua Bk. v. Knoop, 57 U. S. (16 How.), 369; Dodge v. Woolsey, 59 U. S. XV., 401; M. & T. Bk. v. Thomas, 59 U. S., XV., 460. Fixing a rate of taxation by a State on granting a franchise to a foreign corporation, does not, of itself, preclude a right of further taxation by the same State. Erie R. R. Co. v. Penna., ante, 595. Remission of a tax by a vote of a town is, in sub

stance and effect, the same as a gift, and a statute authorizing it is void. Brewer Brick Co. v. Inhab. of Brewer, 62 Me., 62; S. C., 16 Am. Rep., 395.

A limited exemption from taxation as a reward for certain services in the militia, is not an irrevocable contract, but a mere act of ordinary legislation, subject to future amendment or repeal, and not a private contract between the citizen and the State. The People v. Roper, 35 N. Y., 629.

A contract by a State to give up its power to tax any property within it, can be made out only by words which show clearly and unequivocally an intention to make such a contract. Northern Mo. B. R. Co. v. Maguire, ante, 287.

An Act of the Legislature exempting the property of a railroad from taxation, is not a contract to exempt it unless there be a consideration for the Act. West Wis. R. R. Co. v. Supervisors, 93 U. S., 516.

Immunity from taxation is a personal privilege, and is not transferred by a sale of a railroad and its franchises under a mortgage or judgment. Morgan v. La., 93 U. S., 217.

It is competent for a State Legislature to grant, by statute or charter, an irrepealable contract for exemption from taxes. New Jersey v. Yard, U. S., 104.

The intention of the Legislature to exempt the property of corporations from taxation, cannot be inferred from ambiguous terms. If a doubt arise, it must be solved in favor of the State. Hoge v. R. R. Co., 99 U. S., 348.

ferred them upon the railroad companies, it was of the national domain. 3. Under the Act of yet subject to the direction of the Board of Con- 1857, the State might have disposed of them by trol created by the Act, and subject to the suits Board of Control, and if it chose to remit pervision needful to enforce the trust. All the the duty of sale to the Company, as its agent, conditions of the Act of Congress are carefully the delay, if there be any, is its delay, of which re-enacted and others added. it cannot complain or avail itself to the prejudice of the Company or its creditors.