1. In 1867, the Legislature of Mississippi granted a charter to
a lottery company for twenty-five years in consideration of a
stipulated sum in cash, an annual payment of a further sum, and a
percentage of receipts from the sale of tickets. A provision of the
constitution adopted in 1868 declares that
"The legislature shall never authorize any lottery, nor shall
the sale of lottery tickets be allowed, nor shall any lottery
heretofore authorized be permitted to be drawn, or tickets therein
to be sold."
Held:
1. That this provision is not in conflict with sec. 10, art. 1,
of the Constitution of the United States, which prohibits a State
from "passing a law impairing the obligation of contracts."
2. That such a charter is in legal effect nothing more than a
license to enjoy the privilege conferred for the time, and on the
terms specified, subject to future legislative or constitutional
control or withdrawal.
2.
Trustees of Dartmouth College
v. Woodward, 4 Wheat. 518, commented upon and
explained.
3. The legislature cannot, by chartering a lottery company,
defeat the will of the people of the state authoritatively
expressed, in relation to the continuance of such business in their
midst.
The Legislature of Mississippi passed an Act, approved Feb. 16,
1867, entitled "An Act incorporating the Mississippi Agricultural
and Manufacturing Aid Society." Its provisions, so far as they bear
upon the questions involved, are as follows:
"The corporation shall have power to receive subscriptions, and
sell and dispose of certificates of subscriptions which shall
entitle the holders thereof to any articles that may be awarded to
them, and the distribution of the awards shall be fairly made in
public, after advertising,
by the casting of lots, or by lot,
chance, or otherwise, in such manner as shall be directed by
the bylaws of said corporation; . . . and the said corporation
shall have power to offer premiums or prizes in money, for the best
essays on agriculture, manufactures, and education, written by a
citizen of Mississippi, or to the most deserving works of art
executed by citizens of Mississippi, or the most useful inventions
in mechanics, science, or art, mane by citizens of
Mississippi."
Sec. 7 provides that the articles to be distributed or awarded
may consist of lands, books, paintings, statues, antiques,
scientific
Page 101 U. S. 815
instruments or apparatus, or any other property or thing that
may be ornamental, valuable, or useful.
Sect. 8 requires the corporation to pay, before the commencement
of business, to the treasurer of the state for the use of the
university the sum of $5,000, and to give bond and security for the
annual payment of $1,000, together with one-half percent on the
amount of receipts derived from the sale of certificates.
Sect. 9 declares that any neglect or refusal to comply with the
provisions of the act shall work a forfeiture of all the privileges
granted, and subject any officer or agent failing to carry out its
provisions or committing any fraud in selling tickets at drawing of
lottery to indictment, the penalty being a "fine not less than
$1,000, and imprisonment not less than six months."
Sect. 11 enacts that as soon as the sum of $100,000 is
subscribed and the sum of $25,000 paid into the capital stock, the
company shall go into operation under their charter and not before,
and the act of incorporation shall continue and be in force for the
space of twenty-five years from its passage, and that all laws and
parts of laws in conflict with its provisions be repealed, and that
the act shall take effect from and after its passage.
The constitution of the state, adopted in convention May 15,
1868, and ratified by the people Dec. 1, 1869, declares that
"The legislature shall never authorize any lottery, nor shall
the sale of lottery tickets be allowed, nor shall any lottery
heretofore authorized be permitted to be drawn, or tickets therein
to be sold."
The legislature passed an act, approved July 16, 1870,
entitled
"An Act enforcing the provisions of the Constitution of the
State of Mississippi, prohibiting all kinds of lotteries within
said State, and making it unlawful to conduct one in this
state."
The Attorney-General of Mississippi filed, March 17, 1874, in
the Circuit Court of Warren County in that state, an information in
the nature of a
quo warranto, against John B. Stone and
others, alleging that, without authority or warrant of law, they
were then, and for the preceding twelve months had been, carrying
on a lottery or gift enterprise within said county and state under
the name of "The Mississippi Agricultural, Educational,
Page 101 U. S. 816
and Manufacturing Aid Society." The information alleges that
said society obtained from the legislature a charter, but sets up
the aforesaid constitutional provision and the act of July 16,
1870, and avers that the charter was thereby virtually and in
effect repealed.
By their answer the respondents admit that they were carrying on
a lottery enterprise under the name mentioned. They aver that in so
doing they were exercising the rights, privileges, and franchises
conferred by their charter, and that they have in all things
complied with its provisions. They further aver that their rights
and franchises were not impaired by the constitutional provision
and legislative enactment aforesaid.
The state replied to the answer by admitting that the
respondents had in every particular conformed to the provisions of
their charter.
The court, holding that the act of incorporation had been
abrogated and annulled by the constitution of 1868 and the
legislation of July 16, 1870, adjudged that the respondents be
ousted of and from all the liberties and privileges, franchises and
emoluments, exercised by them under and by virtue of the said
act.
The judgment was, on error, affirmed by the supreme court, and
Stone and others sued out this writ.
MR. CHIEF, JUSTICE WAITE delivered the opinion of the Court.
It is now too late to contend that any contract which a state
actually enters into when granting a charter to a private
corporation is not within the protection of the clause in the
Constitution of the United states that prohibits states from
passing laws impairing the obligation of contracts. Art. 1, sec.
10. The doctrines of
Trustees of Dartmouth College
v. Woodward, 4 Wheat. 518, announced by this court
more than sixty years ago, have become so imbedded in the
jurisprudence of the United states as to make them to all intents
and purposes a part of the Constitution itself. In this connection,
however,
Page 101 U. S. 817
it is to be kept in mind that it is not the charter which is
protected, but only any contract the charter may contain. If there
is no contract, there is nothing in the grant on which the
Constitution can act. Consequently the first inquiry in this class
of cases always is, whether a contract has in fact been entered
into, and if so, what its obligations are.
In the present case, the question is whether the State of
Mississippi, in its sovereign capacity, did by the charter now
under consideration bind itself irrevocably by a contract to permit
"the Mississippi Agricultural, Educational, and Manufacturing Aid
Society," for twenty-five years, "to receive subscriptions, and
sell and dispose of certificates of subscription which shall
entitle the holders thereof to" "any lands, books, paintings,
antiques, scientific instruments or apparatus, or any other
property or thing that may be ornamental, valuable, or useful,"
"awarded to them" "by the casting of lots, or by lot, chance, or
otherwise." There can be no dispute but that under this form of
words the legislature of the state chartered a lottery company,
having all the powers incident to such a corporation, for
twenty-five years, and that in consideration thereof the company
paid into the state treasury $5,000 for the use of a university,
and agreed to pay, and until the commencement of this suit did pay,
an annual tax of $1,000 and "one-half of one percent on the amount
of receipts derived from the sale of certificates or tickets." If
the legislature that granted this charter had the power to bind the
people of the state and all succeeding legislatures to allow the
corporation to continue its corporate business during the whole
term of its authorized existence, there is no doubt about the
sufficiency of the language employed to effect that object,
although there was an evident purpose to conceal the vice of the
transaction by the phrases that were used. Whether the alleged
contract exists, therefore, or not depends on the authority of the
legislature to bind the state and the people of the state in that
way.
All agree that the legislature cannot bargain away the police
power of a state.
"Irrevocable grants of property and franchises may be made if
they do not impair the supreme authority to make laws for the right
government of the state, but
Page 101 U. S. 818
no legislature can curtail the power of its successors to make
such laws as they may deem proper in matters of police."
Metropolitan Board of Excise v. Barrie, 34 N.Y. 657;
Boyd v. Alabama, 94 U. S. 645. Many
attempts have been made in this court and elsewhere to define the
police power, but never with entire success. It is always easier to
determine whether a particular case comes within the general scope
of the power, than to give an abstract definition of the power
itself which will be in all respects accurate. No one denies,
however, that it extends to all matters affecting the public health
or the public morals.
Beer Company v. Massachusetts,
97 U. S. 25;
Patterson v. Kentucky, 97 U. S. 501.
Neither can it be denied that lotteries are proper subjects for the
exercise of this power. We are aware that formerly, when the
sources of public revenue were fewer than now, they were used in
some or all of the states, and even in the District of Columbia, to
raise money for the erection of public buildings, making public
improvements, and not unfrequently for educational and religious
purposes; but this Court said, more than thirty years ago, speaking
through Mr. Justice Grier, in
Phalen v.
Virginia, 8 How. 163,
49 U. S. 168,
that
"experience has shown that the common forms of gambling are
comparatively innocuous when placed in contrast with the widespread
pestilence of lotteries. The former are confined to a few persons
and places, but the latter infests the whole community; it enters
every dwelling; it reaches every class; it preys upon the hard
earnings of the poor; and it plunders the ignorant and simple."
Happily, under the influence of restrictive legislation, the
evils are not so apparent now, but we very much fear that with the
same opportunities of indulgence the same results would be
manifested.
If lotteries are to be tolerated at all, it is no doubt better
that they should be regulated by law, so that the people may be
protected as far as possible against the inherent vices of the
system; but that they are demoralizing in their effects, no matter
how carefully regulated, cannot admit of a doubt. When the
government is untrammeled by any claim of vested rights or
chartered privileges, no one has ever supposed that lotteries could
not lawfully be suppressed, and those who manage them punished
severely as violators of the rules of social
Page 101 U. S. 819
morality. From 1822 to 1867, without any constitutional
requirement, they were prohibited by law in Mississippi, and those
who conducted them punished as a kind of gamblers. During the
provisional government of that state, in 1867, at the close of the
late civil war, the present act of incorporation, with more of like
character, was passed. The next year, 1868, the people, in adopting
a new constitution with a view to the resumption of their political
rights as one of the United states, provided that
"The legislature shall never authorize any lottery, nor shall
the sale of lottery tickets be allowed, nor shall any lottery
heretofore authorized be permitted to be drawn, or tickets therein
to be sold."
Art. 12, sec. 15. There is now scarcely a state in the Union
where lotteries are tolerated, and Congress has enacted a special
statute, the object of which is to close the mails against them.
Rev.Stat., sec. 3894; 19 Stat. 90, sec. 2.
The question is therefore directly presented, whether, in view
of these facts, the legislature of a state can, by the charter of a
lottery company, defeat the will of the people, authoritatively
expressed, in relation to the further continuance of such business
in their midst. We think it cannot. No legislature can bargain away
the public health or the public morals. The people themselves
cannot do it, much less their servants. The supervision of both
these subjects of governmental power is continuing in its nature,
and they are to be dealt with as the special exigencies of the
moment may require. Government is organized with a view to their
preservation, and cannot divest itself of the power to provide for
them. For this purpose, the largest legislative discretion is
allowed, and the discretion cannot be parted with any more than the
power itself.
Beer Company v. Massachusetts, supra.
In
Trustees of Dartmouth College
v. Woodward, 4 Wheat. 518, it was argued that the
contract clause of the Constitution, if given the effect contended
for in respect to corporate franchises,
"would be an unprofitable and vexatious interference with the
internal concerns of a state, would unnecessarily and unwisely
embarrass its legislation, and render immutable those civil
institutions which are established for the purpose of internal
government, and which, to subserve those purposes, ought
Page 101 U. S. 820
to vary with varying circumstances,"
p.
17 U. S. 628);
but Mr. Chief Justice Marshall, when he announced the opinion of
the Court, was careful to say (p.
17 U. S.
629),
"that the framers of the Constitution did not intend to restrain
states in the regulation of their civil institutions, adopted for
internal government, and that the instrument they have given us is
not to be so construed."
The present case, we think, comes within this limitation. We
have held, not, however, without strong opposition at times, that
this clause protected a corporation in its charter exemptions from
taxation. While taxation is in general necessary for the support of
government, it is not part of the government itself. Government was
not organized for the purposes of taxation, but taxation may be
necessary for the purposes of government. As such, taxation becomes
an incident to the exercise of the legitimate functions of
government, but nothing more. No government dependent on taxation
for support can bargain away its whole power of taxation, for that
would be substantially abdication. All that has been determined
thus far is, that for a consideration it may, in the exercise of a
reasonable discretion, and for the public good, surrender a part of
its powers in this particular.
But the power of governing is a trust committed by the people to
the government, no part of which can be granted away. The people,
in their sovereign capacity, have establish d their agencies for
the preservation of the public health and the public morals, and
the protection of public and private rights. These several agencies
can govern according to their discretion, if within the scope of
their general authority, while in power; but they cannot give away
nor sell the discretion of those that are to come after them, in
respect to matters the government of which, from the very nature of
things, must "vary with varying circumstances." They may create
corporations, and give them, so to speak, a limited citizenship;
but as citizens, limited in their privileges, or otherwise, these
creatures of the government creation are subject to such rules and
regulations as may from time to time be ordained and established
for the preservation of health and morality.
The contracts which the Constitution protects are those that
relate to property rights, not governmental. It is not always
Page 101 U. S. 821
easy to tell on which side of the line which separates
governmental from property rights a particular case is to be put,
but in respect to lotteries there can be no difficulty. They are
not, in the legal acceptation of the term,
mala in se,
but, as we have just seen, may properly be made
mala
prohibita. They are a species of gambling, and wrong in their
influences. They disturb the checks and balances of a well ordered
community. Society built on such a foundation would almost of
necessity bring forth a population of speculators and gamblers,
living on the expectation of what, "by the casting of lots, or by
lot, chance, or otherwise," might be "awarded" to them from the
accumulations of others. Certainly the right to suppress them is
governmental, to be exercised at all times by those in power, at
their discretion. Anyone, therefore, who accepts a lottery charter
does so with the implied understanding that the people, in their
sovereign capacity and through their properly constituted agencies,
may resume it at any time when the public good shall require,
whether it be paid for or not. All that one can get by such a
charter is a suspension of certain governmental rights in his
favor, subject to withdrawal at will. He has in legal effect
nothing more than a license to enjoy the privilege on the terms
named for the specified time, unless it be sooner abrogated by the
sovereign power of the state. It is a permit, good as against
existing laws, but subject to future legislative and constitutional
control or withdrawal.
On the whole, we find no error in the record.
Judgment affirmed.
