1. A statute which, for the declared purpose "of encouraging the
establishment of a charitable institution," and enabling the
parties engaged in thus establishing it "more fully and effectually
to accomplish their laudable purpose," gave to the institution a
charter, and declared by it
Page 75 U. S. 431
that 11 the property of said corporation shall be exempt from
taxation,
and that an already existing statutory provision, that every
charter of incorporation should be subject to alteration,
suspension, or repeal, at the discretion of the legislature, should
not apply to
it, becomes, after the corporation has been
organized, a contract; and its property is not subject to taxation,
so long as the corporation owns it and applies it to the purposes
for which the charter was granted.
2. A state which, after granting such a charter, passes a law,
taxing property of the corporation, passes a law violating the
obligation of a contract, and, consequently, such its law, is void,
under the Constitution.
On the 3d of February, 1853, the Legislature of Missouri passed
"an act to incorporate the Home of the Friendless, in the City of
St. Louis." The preamble and one section of the act were thus:
"Whereas it is proposed to establish in the City of St. Louis a
charitable institution, to be called 'The Home of the Friendless,'
having for its object, to afford relief to destitute and suffering
females, and the affairs of which shall be in the keeping of
ladies, who contribute pecuniary aid to the institution; therefore,
for the purpose of encouraging said undertaking, and enabling
the parties engaged therein more fully and effectually to
accomplish their laudable purpose,"
"
Be it enacted &c., as follows:"
"SECTION 1. All such persons, of the female sex as heretofore
have or hereafter may become contributors of pecuniary aid, as
hereinafter specified, to said institution, shall be and they are
hereby constituted a body politic and corporate by the name of 'The
Home of the Friendless,' and by that name shall have perpetual
succession, and be capable in law as well to take, receive, and
hold, as to dispose of, as they see proper, all and all manner of
lands, tenements, rents, annuities, franchises, and other
hereditaments and personal property which may be conducive to the
objects of said institution; and all property of said corporation
shall be exempt from taxation; and the sixth, seventh, and
eighth sections of the first article of the act concerning
corporations, approved March 19, 1845,
shall not apply to this
corporation."
The sections thus referred to provided, that the charter
Page 75 U. S. 432
of every incorporation that should thereafter be granted by the
legislature should be subject to alteration, suspension, and
repeal, at the discretion of the legislature.
The corporation was organized and set in action, and by gifts,
grants, and devises, had acquired a considerable amount of real
estate in St. Louis. A constitution, adopted by the state, in the
year 1865, authorized the legislature to impose certain taxes, and
soon after, the legislature did impose a tax upon the real property
of the Home. The corporation declining to pay, the collector of
taxes for the county was about to levy on and sell its real estate,
when the corporation filed a bill in one of the state courts,
praying for an injunction against collecting the taxes, on the
ground that they were illegally assessed, all property of the Home
being, by its act of incorporation, expressly exempted from
taxation at all times. The defendant interposed a demurrer, which
was overruled, and the judgment on the demurrer made final. The
cause was removed to the supreme court of the state, and resulted
in the reversal of the judgment of the lower court, and the
dismissal of the bill or petition.
The case was now here for review, and Supreme Court of Missouri
certifying, as a part of the record, that in the determination of
the suit there was necessarily drawn in question the construction
of that clause of the Constitution of the United States, which
prohibits a state from passing a law impairing the obligation of a
contract, and that the decision was against the right claimed by
the complainant, and was necessary to the adjudication of the
cause, thus bringing the case clearly within the 25th section of
the Judiciary Act, which gives to this Court in such cases a power
to examine and affirm or reverse the decision of the state
court.
The question was, whether the act of 1853 was a contract never
to tax. If so, the subsequent act was in violation of that clause
of the Constitution which says, that "no state shall pass any law
impairing the obligation of contracts."
Page 75 U. S. 435
MR. JUSTICE DAVIS delivered the opinion of the Court.
The case is relieved, by the certificate of the Supreme Court of
Missouri, of all difficulty on the question of the jurisdiction of
this Court, and the important question raised by the record is,
whether the State of Missouri contracted with the plaintiff in
error not to tax its property. If it did so contract, it is
undisputed that the assumed legislation, under the authority of
which the property in controversy was taxed, impaired the
obligation of this contract.
The object for which the Home of the Friendless was incorporated
was to enable those persons of the female sex, who were desirous of
establishing a charitable institution in St. Louis for the relief
of destitute and suffering females, to carry out their laudable
undertaking.
It can readily be seen that a charity of this kind would
Page 75 U. S. 436
be of great benefit to the people of St. Louis, and that the
legislature of the state would naturally be desirous of using all
proper means to promote it. The purposes to be attained by such a
charity are usually beyond the ability of individual effort, and
require an association of persons who will themselves contribute
pecuniary aid, and are willing to become solicitors for the
contributions of others. Usually the initiation of such an
enterprise is in the hands of a few persons who need to be clothed
with more than ordinary powers in order to obtain the successful
cooperation of others. In no way could this cooperation be better
secured than by conferring on the corporators the authority to say
to the benevolent people of St. Louis, that their donations in
money or lands, for the relief of the suffering female poor of the
city, would be held by the institution undiminished by
taxation.
It was doubtless under the influence of these considerations,
and because every government wishes to encourage benevolent
enterprises, that the legislature granted the charter for the Home
of the Friendless, and said to the charitable persons engaged in
this business, that if they would organize the society and conduct
its affairs, would give themselves and solicit others to give for
the common purpose, "that the property of the corporation shall be
exempt from taxation." This charter is a contract between the State
of Missouri and the corporators that the property given for the
charitable uses specified in it, shall, so long as it is applied to
these uses, be exempted from taxation. It follows, that any attempt
to tax it impairs the obligation of the contract. It is proper to
observe, that the immunity from taxation does not attach to the
property after the corporation has parted with it, but is operative
on it while owned by the corporation, and devoted to the uses for
which it was originally given.
It is objected that there is no consideration stated in the act
for the release from taxation, which it is claimed is necessary in
order to uphold the contract. But this is a mistaken view of the
law on this subject.
Page 75 U. S. 437
There is no necessity of looking for the consideration for a
legislative contract outside of the objects for which the
corporation was created. These objects were deemed by the
legislature to be beneficial to the community, and this benefit
constitutes the consideration for the contract, and no other is
required to support it. This has been the well settled doctrine of
this Court on this subject since the case of
Darmouth College
v. Woodward.
It is contended that the rules of construction applicable to
legislative contracts are more stringent than those which are
applied to contracts between natural persons, and that, applying
these rules to this contract, it cannot be sustained as a perpetual
exemption from taxation.
It is true that legislative contracts are to be construed most
favorably to the state if on a fair consideration to be given the
charter, any reasonable doubts arise as to their proper
interpretation; but, as every contract is to be construed to
accomplish the intention of the parties to it, if there is no
ambiguity about it, and this intention clearly appears on reading
the instrument, it is as much the duty of the court to uphold and
sustain it, as if it were a contract between private persons.
Testing the contract in question by these rules, there does not
seem to be any rational doubt about its true meaning. "All property
of said corporation shall be exempt from taxation," are the words
used in the act of incorporation, and there is no need of supplying
any words to ascertain the legislative intention. To add the word
"forever" after the word "taxation" could not make the meaning any
clearer. It was undoubtedly the purpose of the legislature to grant
to the corporation a valuable franchise, and it is easy to see that
the franchise would be comparatively of little value if the
legislature, without taking direct action on the subject, could at
its will, resume the power of taxation. This view is fortified by
the provisions of the general law of the state regarding
corporations, in force at the time this charter was granted, and
which the legislature declared should not apply to this
corporation. The seventh section of the act concerning
corporations, approved
Page 75 U. S. 438
March 19, 1845, provided that
"the charter of every corporation that shall hereafter be
granted by the legislature shall be subject to alteration,
suspension, and repeal, in the discretion of the legislature."
As the charter in controversy was granted in 1853, it would have
been subject to this general law if the legislature had not, in
express terms, withdrawn from it this discretionary authority. Why
the necessity of doing this if the exemption from taxation was only
understood to continue at the pleasure of the legislature?
The validity of this contract is questioned at the bar on the
ground that the legislature had no authority to grant away the
power of taxation. The answer to this position is, that the
question is no longer open for argument here, for it is settled by
the repeated adjudications of this Court, that a state may by
contract based on a consideration, exempt the property of an
individual or corporation from taxation, either for a specified
period, or permanently. And it is equally well settled that the
exemption is presumed to be on sufficient consideration, and binds
the state if the charter containing it is accepted.
*
It is proper to say that the present Constitution of Missouri
prohibits the legislature from entering into a contract which
exempts the property of an individual or corporation from taxation,
but when the charter in question was passed there was no
constitutional restraint on the action of the legislature in this
regard.
Without pursuing the subject further, we are of the opinion that
the State of Missouri did make a contract on sufficient
consideration with the Home of the Friendless, to exempt the
property of the corporation from taxation, and that the attempt
made on behalf of the state through its authorized agent,
notwithstanding this agreement, to
Page 75 U. S. 439
compel it to pay taxes, is an indirect mode of impairing the
obligation of the contract, and cannot be allowed.
Judgment reversed and the cause remanded to the court below,
with directions to proceed in conformity with this
opinion.
THE CHIEF JUSTICE, with MILLER and FIELD, JJ., dissented; see
the opinion of MILLER, J., infra, p. 441, in the next case.
*
New Jersey v.
Wilson, 7 Cranch 164;
Gordon v.
Appeal Tax Court, 3 How. 133;
Piqua Bank
v. Knoop, 16 How. 369;
Ohio Life
and Trust Co. v. Debolt, 16 How. 416;
Dodge v.
Woolsey, 18 How. 331;
Mechanics'
and Traders' Bank v. Thomas, 18 How. 384;
Mechanics' and Traders' Bank
v. Debolt, 18 How. 380;
McGee v.
Mathis, 4 Wall. 143.
