The legislature of Missouri declared that, upon payment of certain fees by the insurance companies, to go to the insurance department, the payment should be in lieu of all taxes, fees and licenses whatever, collected for the benefit of the State, but remain subject to existing laws as to county and municipal purposes. The Life Association of America owned property worth $294,000; it had paid fees under this law amounting to $150. The company claimed to be exempt from any further tax to the State, and it was attempted to be brought within the principle of Illinois Central Railroad v. McLean County, where sums of money were paid and burdens assumed in lieu of all other But the court thought the claim was rather in the nature of an exemption, similar to City of Zanesville v. Richards,2 than a commutation. The intention to exempt the company not being clear, it was held liable for State taxes on its property.3

taxes.

68. Where there is no Consideration for Exemption, it may be Repealed. It would seem proper, if the charter of incorporation is a contract, that the principles that apply to other contracts should apply to that. And should it appear that there was no consideration for the contract, it would be binding only during the pleasure of the parties to the contract. Accordingly we find that when the legislature of Pennsylvania, in 1833, enacted, "that the real property, including ground rents, now belonging and payable to Christ 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," and in 1851 they enacted that all property belonging to corporations or associations should be taxed as other property, and repealed all laws exempting such property, it was held that the repeal was valid. The first act was not a contract, it was a spontaneous concession of the legislature, and no service or duty or other remunerative condition was imposed on the corporation. It is a privilege that from its nature exists dum bene placitum, and may be revoked at the pleasure of the sovereign.*

Subsequent cases in the Supreme Court of the United States would seem to have overruled these authorities; the reasoning of the

1 17 Ill. 29; 30 Id. 140.

5 Ohio, 589.

3 Life Association of America v. Board of Assessors of St. Louis Co. 49 Mo. 520. As to surrender of taxing power not presumed, see also Bank of St. Louis v. Manufacturers' Savings Bank, 49 Mo. 575. Wagner, J.: It is incredible that the legislature intended that taxes on hundreds of thousands of dollars, which may come into the hands of wealthy corporations, should be commuted for the yearly payment of $150 or $200 in official fees."

Rector of Christ Church, Phila. v. County of Phila. 24 How. 300, Campbell. J.; Commonwealth v. Bird, 12 Mass. 442; Alexander v. Wellington, 2 Russ. & My. 35; People v. Comm'rs of Taxes, 47 N. Y. 503, 504.

1

2

court certainly is in conflict with former cases. The legislature of Missouri, for the purpose of establishing a charitable institution, and enabling the parties engaged in it more fully and effectually to accomplish their laudable purpose, chartered the Home of the Friendless, and exempted its property from taxation. Subsequently a tax was imposed on its property. The tax was held void, on the ground that the exemption in the charter was a contract. The same principle was applied to a literary institution, chartered a few days after. We are not disposed to question the authority of these cases; it may be that the benefit to accrue to the State, in having the unfortunate cared for by the corporation in the first case, and the benefit in the increased advantages of education secured to the people of the State, in the second case, are ample considerations to induce the legislature to grant to the corporators who should invest their money in the enterprise, a charter with the privilege of having its property exempt from taxation, and this privilege would be one of the franchises of the corporation. And in this sense, the language of Davis, J., in the first case, "that there is no necessity of looking for the consideration for a legislative contract outside the objects for which the corporation was created," is correct. But, as to his language in a subsequent part of the same opinion, that it has been settled by repeated adjudications of that court that the legislature can grant away the power of taxation, "and that 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 submitted, is not only not supported by the authorities quoted by him, but was not required by the case under consideration, and is a mere obiter dictum. In a late case, the doctrine former cases is reasserted, that a mere exemption without consideration is a nudum pactum. Something must be agreed to be done in consideration of the exemption to make it a contract. But the contract must be shown to exist. There is no presumption in its favor. Every reasonable doubt should be resolved against it. When it exists, it is not to be extended in scope or duration beyond the clear terms of the grant.5

6

In New Jersey v. Wilson, the consideration of an exemption was the cession of the Indian title to a valuable tract of land; the exemp

1 Home of the Friendless v. Rouse, 8 Wall. 430.

* Washington University v. Rouse, 8 Wall. 439.

• Id. 437.

4 Id. 438.

Tucker v. Ferguson, 22 Wall. 527, 575, Swayne, J.; s. P. Louisville, &c. R. R. Co. v. Commonwealth, 10 Bush, 43; Bradly v. McAtee, 7 Bush, 667.

67 Cranch, 161 (Cond. U. S. 498).

3

tion was but a part of the purchase price of land ceded to the State. Gordon v. Appeal Tax Court1 was a bank charter, and the bonus paid the State was the consideration for granting a charter containing exemption from taxation. The cases in 16 How. and 18 How.2 were all cases under the banking act of Ohio, where a special tax was agreed to be paid by the corporators for their charter, which contained an exemption from all further taxation. McGee v. Mathias was a case where the State owned lands subject to overflow, and, in order to promote the drainage and sale of the lands, passed a law exempting them from taxation for ten years, and issued scrip receivable in payment for these lands. The exemption here was a part of the purchase price. No case has come under our observation where there was no consideration for the exemption, and it was made in the discretion of the legislature as a part of the policy of the State, deemed proper at the time as to the matter under consideration, that it has been held the exemption was not repealable at the pleasure of the legislature. The legislature of Ohio, in 1804, vested certain lands, set apart by Congress for a university in Ohio, in a corporation created for the purpose, authorized the lands to be rented out for the benefit of the university, and exempted their part from the payment of State taxes. In 1826, the corporation was authorized to sell the lands; these lands were held not to be exempt in the hands of the purchasers. The evident difference between this case and New Jersey v. Wilson is that there was a consideration for the exemption in the latter case and none in the former. The cases just considered, with the exception of the last, are the cases relied upon by Davis, J., to sustain his dicta.

There are several cases in Connecticut, arising upon the act of 1702, "That all such lands, tenements and hereditaments and other estates, that either formerly have been, or hereafter shall be, given and granted either by the General Assembly of this colony, or by any town, village or particular person, for the maintenance of the ministry of the gospel in any part of this colony, &c., shall also be exempted out of the general lists of estates and free from the payment of rates." This statute was re-enacted in 1821, leaving out the exemption clause. Lands had been given to religious societies under the first act, and they had been leased to third parties, for a gross sum, for 999 years.

13 How. 133.

2 Piqua Bank v. Knoop, 16 How. 369; Ohio Life Ins. & Trust Co. Id. 416; Dodge v. Woolsey, 18 Id. 331; Mechanics' & Traders' Bank v. Thomas, Id. 384; Same v. Debolt, 1d. 380.

34 Wall. 143.

4 Armstrong v. The Treasurer of Athens Co. 16 Peters, 281 (Cond. U. S. 299).

The benefit of the exemption was claimed by the lessees, and the court held that the act of 1702 was a contract between the State and the donors of the charity, which could not be repealed.1 In 1859, the legislature of the State passed a law in reference to these charitable donations, providing that when the society to whom they are given, or may hereafter be given, does not receive an annual income or rent from the real estate donated, or where the conveyance is intended to be a perpetual conveyance, the real estate so donated shall not be exempt from taxation. Land was devised to a religious society, and was leased for 999 years for a gross sum, no annual rent being reserved. It was held the lease was in violation of act of 1859, and void, and the case of Landon v. Litchfield, as to the unconstitutionality of act of 1821, was disapproved. A religious society leased its lands to a clergyman for 999 years, in payment of his settlements; he devised to D., who claimed the exemption from taxation. The court reviewed all the former cases, overruled the cases in 6, 7, and 11 Conn., and approved the case in 31 Conn., holding that the act of 1702 did not constitute a contract between the State and the donors or donees of such charitable gifts as are enumerated in the statute, that the property donated should be forever exempt, and that the act making such property taxable was valid. Carpenter, J., in his opinion, asserts that, in order to make such a contract binding, there must be a consideration. In Missouri, the courts hold that there must be an express contract upon a consideration deemed to be a part of the value of the grant or charter.5

6

The case of Hardy v. Waltham, seems to be in conflict with the view presented. By act of the colonial legislature of Massachusetts, all lands, tenements and revenues of Harvard College, not exceeding in value £500 per annum, shall be thenceforth freed from all civil impositions, rates and taxes. It was held that the lands acquired by the college before their income amounted to £500 were exempt from taxation even in the hands of a lessee. In this case, there had been no attempt by the legislature to repeal the exemption, but the assessors, supposing the exemption only applied to the property while in the hands of the college itself, had listed it for taxation. It will be seen

1 Atwater v. Woodbridge, 6 Conn. 223; Osborne v. Humphrey, 7 Id. 385; Landon v.. Litchfield, 11 Id. 251. In the latter case, the court was divided. Brainerd v. Colchester, 31 Conn. 407.

3 Lord v. Town of Litchfield, 36 Conn. 116.

4 Id. 126.

5 State v. Dulle, 48 Mo. 282, following Lionberger v. Rouse, 43 Id. 468, and Washington University v. Kouse, 42 Id. 308; the last two are the cases overruled in 8 Wall.

67 Pick. 108.

from an examination of the case that this exemption was secured to the college by the Constitution of the State, so that it would not have been within the power of the legislature to repeal the act granting the exemption. The weight of authority is undoubtedly in favor of the position that a clause of exemption from taxation in a charter, or otherwise, in order to be classed as a contract whose obligation cannot be impaired by its repeal or material modification, must be based upon a consideration deemed valuable or beneficial to the State.1

In 1854, the State of New York passed a law exempting from taxation to the extent of $500 property of persons who served in the militia a period of seven years, and had been honorably discharged. In 1865 the law was repealed. The repeal was held valid. The claim of exemption is not a right of property; the law passed by the legislature in relation to the militia of the State, granting the exemption claimed, was made in the exercise of the powers committed to the legislature to promote the interests of the State by such laws as seemed to them best calculated to obtain that end. From the very nature of it a different policy might seem proper to a succeeding legislature, and the former law might be repealed. Porter, J., said: "It is also true that for an adequate consideration, and in the exercise of its general authority, it may invite investments in a particular description of property for the benefit of the State, by stipulating for its exemption, in the hands of the holders, from assessment as a subject of general taxation." 2

Similar to this was a law offering to all persons and to corporations to be formed for the purpose, a bounty of ten cents for every bushel of salt manufactured in the State from water obtained by boring in the State, and an exemption from taxation of all property used in the manufacture. The law was subsequently modified, limiting its operation to persons engaging in the manufacture prior to August 1st, 1861, limiting the exemption to five years, and the amount of bounty money to one person to $5,000. The modification was held valid. The original act was not a contract by the State with persons engaging in the manufacture of salt; it was a law dictated by public policy and the general good, a bounty law, like the laws offering rewards for the killing of destructive animals, one that might be changed whenever the legislative body thought fit to change or modify its policy on the subject.3

I Cooley on Const. Lim. 3d ed. p. 280, authorities in n. 3; Sedgwick on Const. & Stat. Law, 587, D.

2 ? People v. Roper, 35 N. Y. 633, in which the cases in 16 How. and 3 How. quoted by Davis, J., in 8 Wall. 438, are referred to.

3 Salt Co. v. East Saginaw, 13 Wall. 373.