the Indians.1 The contract derived its character of inviolability from the clause of the constitution of the United States inhibiting the states from passing any law impairing the obligation of contracts; a clause which applies to the contracts of a state equally with those of individuals.2

The pledge, however, in order to constitute a contract, must have the elements of a contract, and the vital elements are consent and consideration. Consent to the exemption on the part of the state is never by itself sufficient; but there must be something received by the state for the relinquishment, or something surrendered on the other side which can be deemed a legal equivalent. In the case first referred to the consideration was manifest; the state was bargaining away its lands, and was presenting the exemption from taxation as an inducement for better terms on the other side. So if the legislature by law, in order to secure the establishment of a charitable institution, charter a corporation, and in the charter declare that its property shall be exempt from taxation, and individuals, in reliance thereon, invest their means to secure the accomplishment of the object of the law, a consideration for

1 New Jersey v. Wilson, 7 Cranch, 164. Compare Armstrong v. Athens Co., 16 Pet., 281. The history of this important New Jersey case is sufficiently curious to justify allowing a summary of it in this place. After the federal court had decided that the lands were not taxable, the state, in 1814, assessed them again, and from that time until 1877 they were regularly taxed and the taxes paid. At the last named date the tax was disputed, but the state court before which the controversy was brought decided that such a contract, like any other, was subject to be abrogated by consent, or the benefit of it lost to the party seeking to enforce it, under rules applied in other cases; and that the facts of the case raised a presumption, which must be deemed conclusive, that by some convention with the state the right of exemption had been surrendered. State v. Wright, 41 N. J., 478. See, for peculiar cases, Palmes v. Louisville, etc., Co., 19 Fla., 231, affirmed in 109 U. S., 244, overruling Gonzales v. Sullivan, 16 Fla., 791; State v. Nor. Cent. R. Co., 44 Md., 131; Hand v. Savannah, etc., Co., 17 S. C., 219; Elizabethtown, etc., R. Co. v. Trustees, 12 Bush, 233; Louisiana v. Pillsbury, 105 U. S., 278.

Immunity from taxation by statute is not a franchise. Ches. & O. R. Co. v. Miller, 114 U. S., 176; Detroit Railway Co. v. Guthard, 51 Mich., 180. This becomes important sometimes as bearing on the reserved power to amend charters.

2 New Jersey v. Wilson, 7 Cranch, 164; Dartmouth College v. Woodward, 4 Wheat., 518; Hall v. Wisconsin, 103 U. S., 5; University v. People, 99 U. S., 309; Antoni v. Greenhow, 107 U. S., 769.

the state promise is thus made out. The case would be still plainer if the state received a bonus for the grant of a franchise, stipulating in the grant to give exemption from taxation, or if it made the grant to a corporation on a surrender by it of valuable rights.3

The contract of exemption may either be perpetual or limited to a defined period, and it may be for the taxes generally,

1 Home of the Friendless v. Rouse, 8 Wall., 430. The court in this case said that no consideration was necessary beyond the benefits to the community which it was to be assumed were to be anticipated from the formation of the corporation to accomplish the purpose in view. See, also, Ohio Trust Co. v. Debolt, 16 How., 416.

This case should be compared with Christ's Church v. Philadelphia, 24 How., 300; East Saginaw Salt Manuf. Co. v. East Saginaw, 19 Mich., 259; S. C. in error, 13 Wall., 373. In the first of these cases was considered a legislative act which provided that "the real property, including ground rents, now belonging and payable to Christ's Church Hospital, in the city of Philadelphia, so long as the same shall continue to belong to the said hospital, shall be and remain free from taxes." Held, that the exemption so given was a mere privilege, bene placitum, and might be revoked at the pleasure of the sovereign authority. And the privilege being recalled by a subsequent act, the property of the hospital became taxable like any other. In the second case a legislative act had provided that companies and corporations formed, or that might be formed, for the boring for and manufacturing salt in the state of Michigan, should be entitled to certain benefits conferred by the act, one of which was that "all property, real and personal, used for the purpose mentioned, shall be exempt from taxation for any purpose." This was considered a mere bounty law, dependent for its continuance upon the dictates of public policy, and the voluntary good faith of the legislature. And see Welch v. Cook, 97 U. S., 541; Detroit v. Plankroad Co., 43 Mich., 140.

2 Gordon v. Appeal Tax Court, 3 How., 133, followed in Farrington v. Tennessee, 95 U. S., 679; and in Wendover v. Lexington, 15 B. Monr., 258, 264.

Lucas v. Lottery Commissioners, 11 G. & J., 490. That the franchise to set up a lottery is not a contract, see Moore v. State, 48 Miss., 147; but see, also, Broadbent v. Tuskaloosa, etc., Association, 45 Ala., 170.

4 An act exempting the stock of a railroad company and its real estate from taxation for thirty-six years was sustained as a contract, in Tomlinson v. Branch, 15 Wall., 460; as was a perpetual exemption in Humphrey v. Pegues, 16 Wall., 244. See, also, Pacific R. R. v. Maguire, 20 Wall., 36; Louisville, etc., Co. v. Gaines, 3 Fed. Rep., 266; Sou. Pac. R. Co. v. Laclede, 57 Mo., 147. An exemption from taxation for ten years, of lands which had been donated to the state for reclamation, was held not subject to repeal after the lands had been sold. McGee v. Mathis, 4 Wall., 143. See this case for the construction of such an exemption. Also Railroad Co. v. Loftin, 105 U. S., 258.

or only for some portion of them, or it may be a limitation of the tax within some specified bounds. The same principles apply in each case. Where a certain sum is specified, or a certain percentage upon valuation, or upon receipts or acquisitions in any form, this is in the nature of a commutation of taxes, the state agreeing that the sum named is, under the circumstances, a fair equivalent for what the customary taxes would be, or the fair proportion which the person bargained with ought to pay, and the power thus to commute, though liable to abuse, is undoubted. And this rule applies when a bonus is paid for complete future exemption, to the same extent and on the same reasons as when the commutation is for an annual payment.3

It is perfectly well settled, however, that an exemption granted from motives of state policy merely, and where the state and the citizen do not meet on a basis of bargain and consideration, is to be deemed expressive only of the present will of the state on the subject; and the law granting it, like laws in general, is subject to modification or repeal in the legislative discretion, and it is immaterial that while it continued. in force parties have acted in reliance upon it. It is also well

Dodge v. Woolsey, 18 How., 331; Ohio Trust Co. v. Debolt, 16 How., 416. 2 The federal decisions are very full on this subject. See Piqua Bank v. Knoop, 16 How., 369; Dodge v. Woolsey, 18 How., 331; Mechanics' Bank v. Debolt, 18 How., 380; Mechanics' Bank v. Thomas, 18 How., 384; Jefferson Bank v. Skelly, 1 Black, 436; Franklin Bank v. State, 1 Black, 474; Wright v. Sill, 2 Black, 544; Delaware Railroad Tax, 18 Wall., 206. These decisions are of course conclusive, but the same principle has been declared by the state courts in many cases. See, among others, Gardner v. State, 21 N. J., 557; United, etc., Co. v. Commissioner, 37 N. J., 240; State Lottery v. New Orleans, 24 La. An., 86; Leroy v. Railroad Co., 18 Mich., 233; State Bank v. People, 5 Ill., 303; St. Louis v. Savings Bank, 49 Mo., 574; Farmers' Bank v. Commonwealth, 6 Bush, 127; Mobile v. Insurance Co., 53 Ala., 570. 3 Gordon v. Appeal Tax Court, 3 How., 133; State Bank v. Bank of Smyrna, 2 Houst., 99.

4 See Asylum v. New Orleans, 105 U. S., 362; Parmley v. Railroad Companies, 3 Dill., 25; Robertson v. Land Commissioner, 44 Mich., 274; Tucker v. Ferguson, 22 Wall., 527; West Wis. R. Co. v. Supervisors, 93 U. S., 595; Hoge v. Railroad Co., 99 U. S., 348; State v. Baltimore, etc., R. Co., 48 Md., 49; Central R. Co. v. State, 54 Ga., 401; State v. Georgia R. Co., 54 Ga., 423; Goldsmith v. Georgia R. Co., 62 Ga., 485; State v. Dexter, etc., R. Co., 69 Me., 44; New Jersey v. Yard, 95 U. S., 104.

5 An exemption from taxation of the property of members of the National Guard may be repealed even as to one who enlists while it is in force, and

settled that the contract must be clearly made out. The power to tax being essential to the very existence of the state, there can be no presumption that it has been either abandoned or restricted, and whoever claims that it has been should be able to show by clear words that an intent is expressed to do so, and that consideration existed therefor. And when thus the contract is made out, it cannot be extended by implication beyond the fair import of its terms. As has been said by the federal Supreme Court, " if, on any fair construction of the legis lation, there is a reasonable doubt whether the contract is made

who is in service at the time of the repeal. People v. Assessors of Brooklyn, 84 N. Y., 610.

A statute imposed a certain rate of taxation on insurance companies then in existence or thereafter to be chartered. Held, that the rate might be increased as to subsequently formed companies. Holly Springs, etc., Co. v. Marshall Co., 52 Miss., 281. If a legislature, in extending the boundaries of a city, provides that the lands annexed shall be taxed only at a certain rate, this is no contract and may be repealed. Washburn v. Oshkosh, 60 Wis., 453.

It is, perhaps, hardly necessary to observe that an unconstitutional law cannot establish a contract. Ramsay v. Haeger, 76 Ill., 438. Therefore, any exemptions which the legislature undertakes to grant in disregard of the provisions of the constitution are of no force.

Jones, etc., Manuf. Co. v. Commonwealth, 69 Pa. St., 137. See, also, Commonwealth v. Bird, 12 Mass., 443; Dale v. Governor, 3 Stew., 387; Brainard v. Colchester, 31 Conn., 407, 410; Easton Bank v. Commonwealth, 10 Pa. St. 442, 450; Herrick v. Randolph, 13 Vt., 525, 531; People v. Roper, 35 N. Y., 629; People v. Commissioners of Taxes, 47 N. Y., 501; Bradley v. McAtee, 7 Bush, 667; S. C., 3 Am. Rep., 309; Nor. Mo. R. R. Co. v. Maguire, 49 Mo., 490; S. C., 8 Am. Rep., 141; Pacific R. R. Co. v. Cass Co., 53 Mo., 17; Sloan v. Pacific R. Co., 61 Mo., 24; Wendover v. Lexington, 15 B. Monr., 258, 262; Baltimore & Ohio R. R. Co. v. Marshall Co., 3 W. Va., 319; Stein v. Mobile, 17 Ala., 234; S. C., 24 Ala., 591; State v. Bank of Smyrna, 2 Hous., 99; Erie R. R. Co. v. Commonwealth, 66 Pa. St., 84; Commonwealth v. Pottsville Water Co., 94 Pa. St., 516; Gilman v. Sheboygan, 2 Black, 510, 513; Armstrong v. Athens Co., 16 Pet., 281; Lord v. Litchfield, 36 Conn., 116; S. C., 4 Am. Rep., 41; Bridge Proprietors v. State, 21 N. J., 384, 386; S. C. on appeal, 22 N. J., 593; Stetson v. Bangor, 56 Me., 274; Portland, etc., R. R. Co. v. Saco, 60 Me., 196, 198; Oliver v. Memphis, etc., R. R. Co., 30 Ark., 128; People v. Lawrence, 41 N. Y., 137; Academy of Fine Arts v. Philadelphia, 22 Pa. St., 496; Miller v. Kirkpatrick, 29 Pa. St., 226: Macon v. Central R. R. and Banking Co., 50 Ga., 620; Smith v. Macon, 20 Ark., 17; Providence Bank v. Billings, 4 Pet., 514, 563; Philadelphia, etc., R. R. Co. v. Maryland, 10 How., 376, 393; Minot v. Philadelphia, etc., R. R. Co., 18 Wall., 206; Nor. Mo. R. R. Co. v. Maguire, 20 Wall., 46; Erie Railway v. Pennsylvania, 21 Wall., 497; Tucker v. Ferguson, 22 Wall., 527.

out, this doubt must be solved in favor of the state. In other words, the language used must be of such a character as, fairly interpreted, leaves no room for controversy."

1

By repeated decisions of the federal supreme court it has been authoritatively and conclusively determined that the charter of a private corporation is to be regarded as a contract between the corporators on the one hand, and the state on the other, and that whatever stipulations are contained therein which are intended for the benefit of the corporators, and operate as an inducement to them to accept the charter, are promises by the state based on valid and sufficient consideration, and not subject to recall except with the assent of the corporation itself. Stipulations respecting taxation come within the principle, and are, therefore, irrepealable and not subject to change at the mere will of the state, to the prejudice of those on whose behalf they are made. But the right to amend or repeal may be reserved in the charter, and when it is reserved it is a part of the contract, and may be exercised by the state at pleasure, unless conditions are imposed in respect to its exercise, in which case the conditions must be observed." To avoid the force of the principle that a corporate charter is a contract, which oftentimes operates in some unexpected manner, and, perhaps, unjustly to the public at large, the people of some of the states have made express provision by their con

1 Bailey v. Maguire, 22 Wall., 215. See Moore v. Holliday, 4 Dill., 52; Weston v. Supervisors, 44 Wis., 242; People v. Common Council, 76 N. Y., 20. Naming a rate of taxation, but not expressly limiting it, does not preclude its being raised. State v. Parker, 32 N. J., 426. Compare Louisville R. R. Co. v. Louisville, 4 Bush, 478; Erie R. R. Co. v. Commonwealth, 66 Pa. St., 84; St. Louis v. Boatmen's Ins. and Trust Co., 47 Mo., 150; Union Passenger R. Co. v. Philadelphia, 83 Pa. St., 429. See Delaware R. R. Tax, 18 Wall., 206, for the same principle.

2 Dartmouth College v. Woodward, 4 Wheat., 518; Trustees of University v. Indiana, 14 How., 268; Binghamton Bridge Case, 3 Wall., 51. 331;

3

3 Piqua Bank v. Knoop, 16 How., 369; Dodge v. Woolsey, 18 How., Home of the Friendless v. Rouse, 8 Wall., 430; Washington University v. Rouse, 8 Wall., 439; Wilmington, etc., R. Co. v. Reid, 13 Wall., 264; Humphreys v. Pegues, 16 Wall., 244; Pacific R. Co. v. Maguire, 20 Wall., 36; New Jersey v. Yard, 95 U. S., 104.

4 West Wisconsin R. Co. v. Supervisors, 35 Wis., 257; New Orleans v. Asylum, 31 La. An., 292; Bangor, etc., R. Co. v. Smith, 47 Me., 34; Commonwealth v. Fayette Co. R. Co., 55 Pa. St., 452.

See Flint, etc., P. Co. v. Woodhull, 25 Mich., 99.