A statute of Illinois passed in 1865 declares that all the
property of the Northwestern University shall be for ever free from
taxation. As construed by the assessors and by the supreme court of
the state, a statute of 1872 conforming taxation to the new
constitution of 1870 limited this exemption to land and other
property in immediate use by the institution.
Held:
1. That the latter statute impaired the obligation of the
contract of exemption found in the statute of 1855.
2. That whether the statute of 1866 is a valid contract or is
void by reason of its conflicting with the state constitution of
1848, under which it was made, is a question on which the judgment
of that court can be reviewed here.
3. That the lots, lands, and other property of the university,
the annual profits of which, by way of rent or otherwise, are
devoted to the purposes of the institution as a school could,
within the meaning of that constitution, be exempted by statute
from taxation, and that the exempting power of the legislature was
not limited to real estate occupied or in immediate use by the
university.
At the June Term, 1875, of the County Court of Cook County,
Illinois, application in the manner prescribed by the revenue law
of the state was made by the county collector for a judgment
against lands in that county, delinquent for the taxes levied and
assessed upon them for the year 1874, for state, county, town,
school, and municipal corporation purposes. In the list were
embraced some four hundred and twenty-seven distinct parcels
belonging to the Northwestern University.
Pending this application, the university appeared and filed
Page 99 U. S. 310
its objections to judgment being entered against these parcels,
and to their sale for delinquent taxes, alleging that by an act of
the Legislature of Illinois approved Jan. 25, 1851, it was created
a corporation, and that by an amendment to its charter made Feb.
14, 1855, all its property of whatever kind or description was
declared to be for ever free from taxation for any and all purposes
whatever; that by the terms of the charter and amendment, the state
contracted with it that from and after the passage of the amendment
all its property of whatever kind and description should be forever
free from taxation for any and all purposes, that the charter and
amendment had been accepted by it and were still in force, and that
the taxes complained of had been levied without its assent and in
violation of the charter and amendment.
At the trial, it having been admitted that the proper notice and
return of the delinquent list had been made as required by law, the
collector rested. The university thereupon offered in evidence a
stipulation of counsel that at the time and before the taxes were
assessed and levied the parcels enumerated in the objections
belonged to, and still belong to, the university and are leased by
it to different parties for a longer or a shorter period, and that
all of the parcels are held for sale or lease, for its use and
support, and for the objects contemplated in its charter; that the
lands which are occupied by buildings or other direct appliances of
education are not taxed or included in such parcels; that since the
passage of the charter and amendment, the corporation has expended
in the erection and purchase of buildings, apparatus, and other
facilities and appliances for education, and for the promotion of
the objects stated in the charter, over $200,000, realized from
donations and the sale of lots and lands, and has built up a
university with several departments, in which more than five
hundred students are taught the higher branches of learning.
The charter was also offered in evidence. The first section
constitutes certain individuals therein named a body corporate
under the name of
"Trustees of the Northwestern university, with succession, and
with power to acquire, hold, and convey real and personal property,
and to make by laws for the government of the institution,"
&c. The second section regulates
Page 99 U. S. 311
the term of office of the trustees and requires the board of
trustees to hold the property of the institution for the purposes
of education, and not as stock for their individual benefit.
The fourth section locates the institution in or near Chicago
and gives the corporators power in their corporate name to take
property by gift, grant, conveyance, or devise, and to grant, sell,
devise, let, place out at interest, or otherwise dispose of the
same for the use of the institution, and to apply the funds
collected or the proceeds of the property to erecting buildings,
supporting the teachers, officers, and servants of the institution,
and procuring books and apparatus. It restricts the amount of land
the corporation can hold to two thousand acres unless it receives
the same by gift, grant, or devise.
An amendment to the act of incorporation was approved Feb. 14,
1855. Its third section authorizes the corporation to take, use,
lease, and dispose of property coming to the corporation charged
with any trust and to execute the trusts confided to it. Its fourth
section is as follows: "That all property, of whatever kind or
description, belonging to or owned by the corporation, shall be
forever free from taxation." The fifth section declares the act to
be public, and that it shall take effect from its passage.
Another amendment, in force Feb. 19, 1867, changing the name of
the corporation to "Northwestern University," authorized it by the
latter name to exercise the powers and immunities conferred on it,
and making other changes in the number of the board of
trustees.
The objections were overruled, and, July 14, 1875, judgment was
entered for the delinquent taxes against the lands of the
university.
That judgment having been affirmed by the supreme court, the
corporation sued out this writ of error.
So far as they bear upon this case, the provisions of the
Constitution of Illinois of 1848, which was in force when the
charter and its amendments were enacted; those of the Constitution
of 1870, and of the act of 1872, under which the tax was sought to
be collected, are set forth in the opinion of the Court.
The assignment of errors is as follows:
Page 99 U. S. 312
The Supreme Court erred in adjudging:
First, that no valid contract existed between the state
and the plaintiff in error by virtue of the amended charter granted
to and accepted by it, whereby it was protected by the Constitution
of the United States from the taxation complained of.
Second, that the provision of the amended charter
exempting the property of the plaintiff in error from taxation was
in conflict with the constitution of the state, and void.
Third, that the parcels of land described in these
proceedings were subject to taxation for state, county, and other
purposes for the year 1874, under the constitution and laws of the
state notwithstanding their exemption by the amended charter.
Page 99 U. S. 318
MR. JUSTICE MILLER delivered the opinion of the Court.
This is a writ of error to the Supreme Court of Illinois,
bringing before us a judgment of that court deciding that
Page 99 U. S. 319
certain property of the plaintiff was liable to taxation, which
was resisted on the ground that it was exempt by a legislative
contract.
The university was incorporated by an Act of the Legislature of
the State of Illinois approved Jan. 28, 1851, which contained the
powers necessary to its usefulness as an institution of learning,
and, among other provisions, authorized it to purchase and hold
real estate to the extent of two thousand acres of land and receive
gifts and devises of land above that amount, which must be sold
within ten years. In 1855, the legislature, by an amendment to this
charter, appointed three additional trustees and enlarged its
powers in some respects not very important. But the fourth section
of that act is the one supposed to contain the contract on which
this case must be decided. It was this:
"That all property, of whatever kind or description belonging to
or owned by said corporation shall be forever free from taxation
for any and all purposes."
The state constitution of 1848, in force when the charter and
amended charter above cited were enacted, declares that
"The property of the state and counties, both real and personal,
and such other property as the General Assembly may deem necessary
for school, religious, and charitable purposes, may be exempt from
taxation."
The record shows a very large list of lots and lands in Cook
County which the plaintiff asserted to be free from taxation under
this law, but which were listed for taxes of the year 1874 and
about to be sold for their nonpayment. By proper judicial
proceedings, the question arose before the supreme court of the
state, which held that they were liable to be so taxed.
A motion was made sometime before the case was reached for
argument in this Court to dismiss it for want of jurisdiction, and
was overruled, but the Attorney General of Illinois renews the
objection now in connection with the main argument.
This question of jurisdiction to review the judgments of state
courts is so frequent, and the principles which govern it so well
settled, that we need not be very elaborate in our opinion on that
point. The argument is that the judgment of the state court is
limited to a construction of the fourth clause of the amendatory
charter of 1855, as it is affected by the constitution
Page 99 U. S. 320
under which it was enacted, and that whether that statute was a
contract or not, or whether it was properly construed or not, it is
still but the decision of a court construing a contract or a
statute, and there is no law of the state impairing the obligation
of that contract within the meaning of the Constitution of the
United States.
If this were true in point of fact, the conclusion would be
sound, as we have repeatedly held in this Court.
Railroad
Company v. Rock, 4 Wall. 177;
Railroad
Company v. McClure, 10 Wall. 511;
Knox v.
Exchange Bank, 12 Wall. 379.
But the premises assumed are not justified by the facts. The
general revenue law of Illinois, prior to the amendment of 1855 to
plaintiff's charter, contained nothing which exempted its property
from taxation. When that act was passed, it became a part of the
law of the state governing taxation as applicable to the property
of the university. The law remained in this condition until the
state adopted a new constitution in 1870, the part of which
relating to this subject is in these words:
"The property of the state, counties, and other municipal
corporations, both real and personal, and such other property as
may be used exclusively for agricultural and horticultural
societies, for school, religious, cemetery, and charitable
purposes, may be exempted from taxation, but such exemption shall
be only by general law."
In order to conform the law of the state on the subject of
taxation to this provision of the new constitution, the legislature
revised its revenue laws in 1872, and in this statute the exemption
established was:
"
First, all lands donated by the United States for
school purposes not sold or leased. All public school houses. All
property of institutions of learning, including the real estate on
which the institutions are located, not leased by such institutions
or otherwise used with a view to profit."
"
Second, all church property actually and exclusively
used for public worship when the land (to be of reasonable size for
the location of the church building) is owned by the
congregation."
It was under this law the local officers proceeded in assessing
plaintiff's land for taxation, and it was their construction of
the
Page 99 U. S. 321
law which was sustained by the supreme court. If, therefore, the
legislation of 1855 was a contract which exempted the property in
question from taxation, and by the law of 1872, as construed by the
supreme court, it is held liable to taxation, it is manifest that
it is the law of 1872 and the Constitution of 1870 which impairs
the obligation of that contract, however the court, by an erroneous
construction of that contract, may be led to hold otherwise. It is
strenuously insisted that these provisions of the Constitution of
1870 and the revenue law of 1872 do not repeal the exemption as
established by the fourth section of the amended charter of 1855,
because that section was in excess of the authority conferred by
the Constitution of 1848. But this depends on the construction of
that contract as affected by the constitution under which it was
enacted. If by virtue of that constitution the legislature of that
day could only exempt plaintiff's real estate so far as it was in
immediate use for school purposes, as was held by the supreme
court, then it may not repeal that statute or impair that contract,
for the exemption will probably amount to the same thing under
either statute. But if it is a contract, as is contended for by
plaintiff's counsel, which, under a true construction of the
Constitution of 1848, exempts all the property of plaintiff which
is held by it for appropriation to the purposes of the university
as a school, as an institution for teaching, and which is held for
no other purpose whatever, and which can as effectually promote the
purpose by leases, of which the rent goes to support the school, as
in any other way, then the law of 1872 and the Constitution of 1870
do, to the extent of the difference arising from these two
constructions, impair the obligation of the contract of 1855.
Whether that contract is such as to be impaired by these later
laws is one of the questions of which this Court always has
jurisdiction.
Jefferson Branch Bank v.
Skelly, 1 Black 436;
Bridge
Proprietors v. Hoboken, 1 Wall. 144;
Delmas v. Insurance
Company, 14 Wall. 668.
The Supreme Court of Illinois, in its opinion found in the
record, appears to concede that the act of 1855, to the extent that
it was authorized by the state constitution, was a contract.
"It is not claimed," says the court,
"that appellant is in any
Page 99 U. S. 322
sense a public corporation, but it is claimed that the purpose
for which it is created is so far beneficial to the public that it
affords a sufficient consideration for the grant of exemption from
taxation in the amendment, and that when the amendment was accepted
and acted on by the corporation it must be held a vested right
which cannot be withdrawn by subsequent legislation, because of the
provision of the United States which prohibits a state from passing
a law impairing the obligation of a contract. If it was competent
for the General Assembly to make the exemption, we are not disposed
to contest the correctness of their position; but if it was not
competent to make the exemption, the attempt was a nullity and the
case is not affected by the Constitution of the United States."
The Court thus concedes that there was a contract so far as the
legislative power extended.
It is possible, if that question had been fully investigated,
and all the facts necessary to decide it were before the court, it
might not appear that all the lands subjected to taxation by the
judgment of the supreme court were bought after the date of the
amended charter, or donated on the faith of that exemption.
But it does appear, by a stipulation made for that purpose, that
since the granting of said amended charter the corporation
"has expended, in the erection and purchase of buildings,
apparatus, and other facilities and appliances for education, and
for the promotion of the objects stated in and contemplated by the
act of incorporation, over $200,000, realized from donations and
the sale of lots and lands, and has built up a university, with
several departments of learning, in which more than five hundred
students are taught the higher branches of learning."
It is perhaps a fair inference from this statement, and in
deference to the holding of the supreme court that there was such
acceptance of this act of 1855, and such investments made on the
faith of it, that at least some portion of the property now in
question is protected by contract, if the exemption clause lawfully
covers it.
It will readily be conceded that the language of the fourth
section of the act of 1855 is broad enough for that purpose:
"All property, of whatever kind or description, belonging to
Page 99 U. S. 323
or owned by said corporation, shall be forever free from
taxation for any and all purposes."
But the argument is that since the constitution then in force
only permitted the legislature to exempt from taxation the
property, real and personal, used by the university in immediate
connection with its function of teaching, the statute must be
limited to property so used. This was the view taken by the supreme
court of the state. "By the language of the Constitution," says the
court,
"while a discretion is conferred on the General Assembly whether
to exempt or not, and if it shall determine to exempt, the amount
of the exemption, it is clearly restricted in the exercise of this
discretion to property for schools and religious and charitable
purposes; property for such purposes, in the primary and ordinary
acceptation of the term, is property which in itself is adapted to
and intended to be used as an instrumentality in aid of such
purposes. It is the direct and immediate use, and not the remote or
consequential benefit to be derived through the means of the
property, that is contemplated."
Though the court is here construing the constitution of its own
state, and is therefore entitled to our consideration on that
ground as well as for its character and standing for learning and
ability, we find ourselves, in the performance of the duty of
reviewing this case, compelled to differ with that court in the
nature and extent of the constitutional limitation of this
contract, as made by the legislature of the same state. For this
constitution necessarily becomes a part of the contract which is
said to be impaired by subsequent legislation.
The first observation we have to make is that the constitution
does not say "property used for schools," as the opinion of the
court implies. Neither the important word "use" or "schools" is
found in the section of the instrument on that subject. If the
language were that the legislature might "exempt property for the
use of schools," we should readily agree with that court. Indeed,
that would be the appropriate language to convey the idea on which
the court rests its decision.
The makers of the constitution, however, used other language
because they had another meaning, and did not use that because they
did not mean that. They said that the legislature
Page 99 U. S. 324
might exempt from taxation "such property as they might deem
necessary" (not for the use of schools, but) "for school purposes."
The distinction is, we think, very broad between property
contributing to the purposes of a school, made to aid in the
education of persons in that school, and that which is directly or
immediately subjected to use in the school. The purposes of the
school and the school are not identical. The purpose of a college
or university is to give youth an education. The money which comes
from the sale or rent of land dedicated to that object aids this
purpose. Land so held and leased is held for school purposes, in
the fullest and clearest sense.
A devise of a hundred acres of land "to the president of the
university, for the purposes of the school," would be not only a
valid conveyance, but, if the president failed to do so, a court of
chancery would compel him to execute the trust; but if he leased it
all for fair rent and paid the proceed into the treasury of the
corporation to aid in the support of the school, he would be
executing the trust.
When the Constitution, in 1870, came to be reconstructed, its
framers had learned something about exemption from taxation, as we
shall see by placing the provision in that constitution alongside
that of 1848 on the same subject:
"
1848"
"The property of the state and counties, both real and personal,
and such other property as the General Assembly may deem necessary
for school, religious, and charitable purposes, may be exempt from
taxation."
"
1870"
"The property of the state, counties, and other municipal
corporations, both real and personal, and such other property as
may be used exclusively for agricultural and horticultural
societies, for school, religious, cemetery, and charitable
purposes, may be exempted from taxation; but such exemption shall
be only by general law."
Here it is only such property as may be exclusively used for
school purposes that may be exempted, and this only by a general
law.
The general law passed in 1872 to give effect to the change in
the constitution exempted only "the real estate on which the
institutions of learning are located, not leased by such
institutions or otherwise used with a view to profit." This is
Page 99 U. S. 325
what the supreme court says was meant by the Constitution of
1848; but if it was, it took a deal of change in the language when
the framers of the new constitution and of the new tax law came to
express the same idea. We cannot come to the conclusion that they
were intended to mean the same, but that the later law was designed
to limit more enlarged power of the earlier one.
If our construction of the Constitution of 1848 is sound, the
judgment of the supreme court must be reversed, for the stipulation
of facts on which the case was tried says that
"it is admitted that all the lots and lands mentioned and
described in the objections filed in said proceeding for judgment,
whereon said taxes are levied, excepting improvements on the same,
are leased by said university to different parties for a longer or
shorter period, and that all said lots and lands are held for sale
or lease, for the use and support of said institution and the
objects contemplated by said charter."
We are of opinion that such use and such holding bring the lots
within the class of property which by the Constitution of 1848 the
legislature could, if it deemed proper, exempt from taxation, and
that the legislature did so exempt it.
The judgment of the supreme court of the state will be reversed,
and the case remanded to that court for further proceedings not
inconsistent with this opinion, and it is
So ordered.
MR. JUSTICE STRONG and MR. JUSTICE BRADLEY did not sit in this
case nor take any part in deciding it.
