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United States Supreme Court

75 U.S. 430

Home of the Friendless  v.  Rouse

ERROR to the Supreme Court of Missouri.

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 19th, 1845, shall not apply to this corporation.'

The sections thus referred to provided, that the charter 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.'

Mr. B. R. Curtis, for the appellant:

1. The charter contains not only an explicit promise on the part of the State, that whatever property should be owned by this charity should not be taxed, but, what is very unusual, if not unprecedented, it contains an assurance that the legislative power should not thereafter be used to interfere with this franchise.

The discretionary authority which the legislature reserved, in regard to corporations in general, it is declared, shall not exist as to this corporation.

The charter in express terms, holds out to the benevolent persons to whom it is addressed, that, if they will take upon themselves the burden of organizing this corporation, of making themselves, and soliciting from others, donations and grants, and of administering its affairs for the relief of suffering female poor of the city of St. Louis, the funds thus obtained, devoted, and held, shall not be diminished by taxation.

2. That the legislature had power to make this contract, and that when made and accepted it became one of the franchises of this corporation, of which it could not be deprived, is too well settled to require a citation of numerous authorities. [1]

Messrs. Dick and Blair, contra:

1. The legislature, in 1853, for the mere consideration that the Home should be established, with no obligations or duties imposed upon it, had no power to promise that the State of Missouri should never have the legal authority to impose a tax upon any property which it might acquire, and, at the same time, confer upon it power to acquire an unlimited amount of property. The State may accept a bonus in place of a tax, or may fix upon a given rate of taxation, and thus, for a consideration, bargain away the power to levy taxes in the usual way. But this charter makes no such contract. [2]

2. The legislature has not in the act of 1853, declared its intention to bind the State never to impose any such tax. The language used does not expressly say that the State forever is to be bound, and the law will not imply such meaning. [3]

3. The rule of construction applicable to laws relied upon as contracts, granting to corporations special advantages, to the detriment of the public, is that they shall be construed strictly against the corporation.

4. There is no consideration stated in the law for the release from taxation. The establishment of the institution by the corporation, was the consideration which made the grant of the charter binding upon the State, and the contract to that extent is beyond the control of the State as a contracting party. But the exemption from taxation was a mere gratuity, intended to last during the pleasure of the State. [4]

The legislature of 1853 omitted to provide for any advantage in the future to the State, which should be commensurate with the greater and growing advantage to the institution, which would accrue from the increase of taxes appropriated to its use with the increase of its property. The law shields the Home from rendering any account of the amount of public funds thus devoted to its use, and authorizes an unlimited increase.

This omission of the legislature, as the agent of the State, to provide for any commensurate advantage to the State, or for any check upon the corporation, is fatal to the instrument as a contract. For, first, it will not be held that the legislature could have intended any such arrangement to have been perpetual and obligatory as a contract on the people; and, second, if such was its intention, it had no such legal power as an agent. The cases already cited, with others, show this. [5]

5. Retrospective laws divesting rights not secured by contract may be passed by a State [6]

Reply.-To suppose that any consideration beyond the public objects for which this corporation was created was necessary as a basis of a contract is a mistake. The consideration is found in the nature of those objects, the acceptance of the charter, and the consequent implied undertaking to use its franchises in the way and for the purposes in which they were granted.

This has been the settled law of this court since the Dartmouth College case, [7] and is fully set forth anew of late, in the Binghamton Bridge case, [8] as the continuing and unalterable judgment of the court.

Mr. Justice DAVIS delivered the opinion of the court.


^1  See the cases collected in Cooley's Constitutional Limitations, 279-81.

^2  Rector of Christ Church v. County of Philadelphia, 24 Howard, 300; East Hartford v. Hartford Bridge Co. 10 Id. 511, 535; Commonwealth v. Bird, 12 Mass. 443, cited in 24 Howard, 300, 303; Providence Bank v. Billings, 4 Peters, 561.

^3  Charles River Bridge v. Warren Bridge, 11 Peters, 536, 583; Butler v. Penn., 10 Howard, 402.

^4  Phalen v. Virginia, 8 Howard, 163; Bank of Columbia v. Okely, 4 Wheaton, 235; Aspinwall v. Commissioners, 22 Howard, 364.

^5  State Bank of Ohio v. Knoop, 16 Howard, 378; Commonwealth v. Bird, 12 Massachusetts, 443; Brewster v. Hough, 10 New Hampshire, 139; People v. Roper, 35 New York, 629; Mott v. Pennsylvania Railroad Co., 6 Casey, 9; Commonwealth v. Easton, 10 Barr, 442; Gardner v. State, 1 Zabriskie, 557.

^6  Satterlee v. Matthewson, 2 Peters, 413; Watson v. Mercer, 8 Id. 110; Railroad v. Nesbit, 10 Howard, 401.

^7  4 Wheaton, 625

^8  3 Wallace, 73.

This work is in the public domain in the United States because it is a work of the United States federal government (see 17 U.S.C. 105).