Where a state, in order to promote the drainage and sale of
certain swamp lands belonging to it and which it was desirous of
reclaiming, has passed, by way of encouraging purchasers, a law
that such lands "shall be exempt from taxation for the term of ten
years" and issued transferable scrip receivable for them, a repeal
of the exemption act, so far as it concerns lands paid for either
before or after the repeal, with scrip issued before the repeal,
impairs a contract of the state with the holders of such scrip.
In 1850, the United States granted by act of Congress to the
State of Arkansas all the swamp and overflowed government lands
within its limits on condition that the proceeds of the lands or
the lands themselves should be applied as far as necessary in
reclaiming them for cultivation by means of levees and drains.
The state accepted the grant and by an act of the legislature in
1851 provided for the sale of the lands, for the issue of
transferable scrip receivable for any lands not already taken up at
the time of selection by the holder, for contracts for the making
of levees and drains, and for the payment of contractors in scrip
In the fourteenth section of this act it was provided that
"To encourage by all just means the progress and the completing
of the reclaiming such lands by offering inducements to purchasers
and contractors to take up said lands, all said swamp and
overflowed lands shall be exempt from taxation for the term of ten
years or until they shall be reclaimed."
In 1855 this section was repealed and provision was made by law
for the taxation of swamp and overflowed lands, sold or to be sold,
precisely as other lands.
The plaintiff in error, before this repeal, had become the
owner, by transfer from contractors, of a large amount of the
script issued under the act of 1851, and with this scrip,
Page 71 U. S. 144
after the repeal, took up and paid for many sections and parts
of sections of the granted lands lying in Chicot County.
In 1857, another act of the legislature, local in its nature,
provided for the making of levees and drains in Chicot County, and
authorized a special tax to meet the cost. This special tax was
assessed upon the unreclaimed swamp lands of the plaintiff in error
as well as upon other lands, and the defendant in error, under
authority of the act, proceeded to take the necessary measures for
the collection of the tax.
The Constitution of the United States ordains that "no state
shall pass any law impairing the obligation of contracts."
The plaintiff in error filed his bill in the proper state court
alleging that the acts of 1855 and 1857 impaired the obligation of
the contract of the state with the United States, expressed in the
grant by Congress in 1850 and its acceptance by the state and also
the contract between the state and the levee contractors and other
lawful holders of swamp land scrip issued under the act of 1851,
that such scrip should be receivable for unlocated swamp lands, and
that such lands should not be subject to taxation for ten years
from the time when taken up, or until reclaimed, and prayed an
injunction to restrain the defendant in error from the collection
of the taxes authorized by those acts.
In his answer to the bill, the defendant stated that the state
and county taxes imposed on the lands of the complainant had been
stricken out of the assessment by order of the county court, and
justified his proceeding as sheriff to collect the special levee
tax under the act of 1857.
The cause was brought to hearing in the Supreme Court of
Arkansas, by whose decree the bill of the complainant was
dismissed, and it now came before this tribunal upon writ of error
directed to that court.
Page 71 U. S. 155
THE CHIEF JUSTICE delivered the opinion of the Court, and after
stating the case, proceeded:
The first question which requires consideration in the case
before us is was the levee tax imposed in violation of any contract
between the state and the United States?
It is not doubted that the grant by the United States to the
state upon conditions, and the acceptance of the grant by the
state, constituted a contract. All the elements of a contract met
in the transaction -- competent parties, proper subject matter,
sufficient consideration, and consent of minds. This contract was
binding upon the state, and could not be violated by its
legislation without infringement of the Constitution.
The contract required the state to appropriate the lands granted
to the purpose of reclaiming them. The lands themselves might be
conveyed to the levee contractors for work performed, or the
contractors might be paid in money or in scrip representing land.
If the state therefore, after acceptance of the grant and without
applying the lands or their
Page 71 U. S. 156
proceeds in money or scrip to the purpose of reclamation, had
sought, by means of taxation, to compel purchasers to pay for the
levees and drains necessary to reclaim their land, it would
certainly be difficult to say that the contract was not violated.
But the case before us hardly comes within this description. The
allegation and proofs do not show that the state had not applied
all the lands granted and their proceeds to the making of levees
and drains before proceeding to impose the special tax, and if this
was done and the work of reclamation remained still incomplete, the
imposition of such a tax for the completion or preservation of the
work cannot be regarded as inconsistent with the obligation of the
contract between the state and the United States.
The next and only remaining question is was the levee tax in
violation of any contract between the state and the
It seems quite clear that the act of 1851, authorizing the issue
of transferable land scrip and its receipt from locators of land in
payment, and the provision in the fourteenth section, offering
inducements to purchasers and contractors by exempting from
taxation, for ten years or until reclaimed, all the swamp or
overflowed lands, constituted a contract between the state and the
holders of the land scrip issued under the act.
When the scrip was issued to a contractor, it represented a
certain quantity of land untaxable for ten years, unless the land
should be sooner made fit for cultivation. When transferred to
another person, it represented to him a like quantity of like land.
The contract of the state was to convey the land for the scrip and
to refrain from taxation for the time specified. Every piece of
scrip was a contract between the state and the original holder and
his assigns. Now what was the effect of that contract when made?
Did it not bind the state to receive the scrip in payment for swamp
land, exempted for a limited time from taxation? The scrip, if not
receivable for lands, was worthless. To annul the quality of
receivability was to annul the contract. But the
Page 71 U. S. 157
exemption of the lands for which it was receivable from taxation
was a principal element in its value, and repeal of the exemption
was the destruction of this element of value. This was clearly an
impairment of the contract. The state could no more change the
terms of the contract by changing the stipulated character of the
land to be conveyed in satisfaction of the scrip as to liability to
taxation than it could abrogate the contract altogether by refusing
to receive the scrip at all in payment for land.
We are constrained to regard the repeal of the exemption act, so
far as it concerns lands paid for either before or after the repeal
by scrip issued and paid out before repeal as impairing the
contract of the state with the holders of the scrip.
It was strenuously urged for the defendant that the exemption
contemplated by the statute was exemption from general taxation,
and not from special taxation for local improvements benefiting the
land, such as the making of levees, and many authorities were cited
in support of this view. The argument would have great force if the
provision for exemption had been contained in a general tax law or
in a law in framing which the legislature might reasonably be
supposed to have in view general taxation only. But the provision
under consideration is found in a law providing for the
construction of levees and drains and devoting to that object funds
supposed to be more than adequate, derived from the very lands
exempted, and the exemption is for ten years, or until reclaimed,
and is offered as an inducement to take up the lands, and thus
furnish those funds. It is impossible to say that this exemption
was not from taxation for the purpose of making these levees and
drains as well as from taxation in general. Any other construction
would ascribe to the legislature an intention to take the whole
land for the purposes of the improvement and then to load it with
taxation for the same object in the hands of purchasers whom it had
led to expect exemption from all taxation, at least until the land
should be reclaimed.
Page 71 U. S. 158
The decree of the Supreme Court of Arkansas must therefore
be reversed and the cause remanded, with instructions to enter a
decree in conformity with this opinion.
N.B. The same order was made in cases Nos. 28, 29, 30, 31, 32,
and 33, argued with the above case, and which THE CHIEF JUSTICE
said were governed by its decision.