court of the state, on grounds involving no question under the Federal Constitution, it was held that there was no impairment of the contract by subsequent legislation which assumed the contract to have been void.23 In order to come within this prohibition, said Mr. Justice Gray, "not only must the obligation of a contract have been impaired, but it must have been impaired by a law of the state. The prohibition is aimed at the legislative power of the state, and not at the decisions of its courts, or the acts of administrative or executive boards or officers, or the doings of corporations or individuals." 24 "It must," said Mr. Justice Miller in another case, "be the constitution, or some law of the state, which impairs the obligation of the contract, or which is otherwise in conflict with the Constitution of the United States; and the decision of the state court must sustain the law or constitution of the state in the matter in which the conflict is supposed to exist." 25 But a contract of exemption is protected from constitutional impairment as well as from statutory impairment.26 The validity of a contract between a state. and a corporation relative to the taxation of the latter is to be determined by the state constitution in force at the time the contract was made, and if such contract was valid at such time it cannot subsequently be impaired, notwithstanding the fact that it is obnoxious. to the state constitution afterwards adopted and in force at the time. its abrogation is attempted. "A change of constitution cannot release. a state from contracts made under a constitution which permits them to be made." 27 Whether a contract exists, and, if one does, what are its obligations and whether those obligations have been impaired are questions the ultimate decision of which rest with the Federal Supreme Court, and that that court is not bound by decisions of the state 23 New Orleans v. New Orleans Water Works Co., 142 U. S. 79, 35 L. Ed. 943. 24 New Orleans Water Works Co. v. Louisiana Sugar Refining Co., 125 U. S. 18, 30, 31 L. Ed. 607. 25 Mississippi & M. R. Co. v. Rock, 4 Wall. (U. S.) 177, 181, 18 L. Ed. 381. 26 Pacific R. Co. v. Maguire, 20 Wall. (U. S.) 36, 22 L. Ed. 282. 27 Dodge v. Woolsey, 18 How. (U. S.) 331, 15 L. Ed. 401. See also Jefferson Branch Bank v. Skelly, 1 Black (U. S.) 436, 17 L. Ed. 173. A contract of exemption cannot be impaired regardless of the subsequent adoption of state constitution prohibiting the granting of exemptions. Home of the Friendless v. Rouse, 8 Wall. (U. S.) 430, 19 L. Ed. 495. See also Keokuk & W. R. Co. v. Missouri, 152 U. S. 301, 38 L. Ed. 450. courts in the matter,28 "except where they have been so long and so firmly established as to constitute a rule of property." 29 § 4637. Reservation of power to alter, amend or repeal. If the legislature in granting a charter and exempting a corporation from taxation, in whole or in part, or in granting an exemption by a statute passed after the grant of a charter, reserves the right to alter, amend or repeal the charter or statute, it may afterwards revoke the exemption or increase a tax imposed by the charter;" or it may change the mode of taxation.31 "No question can arise 28 As far as the independent judgment of the Federal Supreme Court is concerned it is immaterial whether the judgment of the state supreme court in the matter of an exemption overruled the plea of contract or sustained it. Louisville & N. R. Co. v. Palmes, 109 U. S. 244, 27 L. Ed. 922. * "It is well settled that the decision of a state court holding that, as a matter of construction, a particular charter or a charter provision does not constitute a contract, is not binding on [the Federal Supreme Court]. The question of the existence or non-existence of a contract in cases like the present is one which [such] court will determine for itself, the established rule being that where the judgment of the highest court of a state by its terms or necessary operation, gives effect to some provisions of the state law which is claimed by the unsuccessful party to impair the contract set out and relied on, [the Supreme Court of the United States] has jurisdiction to determine the question whether such a contract exists as claimed, and whether the state law complained of impairs its obligation." Mobile & O. R. Co. v. Tennessee, 153 U. S. 486, 38 L. Ed. 793. 29 Shelby County v. Union & Planters' Bank, 161 U. S. 149, 40 L. Ed. 650. 30 For a full discussion, see Chap. 57, supra. See also the following: United States. Union Passenger Ry. Co. v. Philadelphia, 101 U. S. 528, 25 L. Ed. 912; Tomlinson v. Jessup, 15 Wall. 454, 21 L. Ed. 204; Ohio Life Insurance & Trust Co. v. Debolt, 16 How. 416, 14 L. Ed. 997; Northern Bank of Kentucky v. Stone, 88 Fed. 413. Maryland. State v. Northern Cent. Ry. Co., 44 Md. 131. New Jersey. Morris & E. R. Co. v. Miller, 30 N. J. L. 368. New York. Mayor, etc., of New York v. Twenty-Third St. Ry. Co., 113 N. Y. 311, 21 N. E. 60. Pennsylvania. Wagner Free Institute v. Philadelphia, 132 Pa. St. 612, 19 Am. St. Rep. 613, 19 Atl. 297; Com. v. Fayette County R. Co., 55 Pa. St. 452; Iron City Bank v. Pittsburg, 37 Pa. St. 340. A constitutional provision declaring that the legislature may alter or revoke any charter whenever in their opinion it may be injurious to the commonwealth gives to the legislature power to determine whether an exemption granted by a charter which is subject to such provision is thus injurious and should be repealed. Wagner Free Institute v. Philadelphia, 132 Pa. St. 612, 19 Am. St. Rep. 613, 19 Atl. 297. 31 Detroit St. Ry. Co. v. Guthard, 51 Mich. 180, 16 N. W. 328. "The right reserved to the legislature to alter or repeal the charter of a corporation includes the right to as to the impairment of the obligation of a contract, when the company accepted all of its corporate powers subject to the reserved power of the state to modify its charter and to impose additional burdens upon the enjoyment of its franchise." 32 The provision, contained in a general statute, that the legislature shall have the right to alter, amend or repeal any corporate charter subsequently granted operates in the case of a contract of exemption subsequently entered into by the state and a corporation through the medium of either an original or amended charter to the same extent as if the right of alteration, amendment or repeal had been expressly reserved in such charter,33 provided, of course, that there tax a corporation upon its franchises as such instead of exacting license fees as had been formerly done." New York v. Cook, 148 U. S. 397, 37 L. Ed. 498. See also New York v. Twenty-third St. R. Co., 113 N. Y. 311, 21 N. E. 60. 32 Sioux City St. R. Co. v. Sioux City, 138 U. S. 98, 34 L. Ed. 898. In New York v. Cook, 148 U. S. 397, 37 L. Ed. 498, the court quoted Hamilton Gaslight & Coke Co. v. Hamilton City, 146 U. S. 258, 36 L. Ed. 963, which involved the matter of the impairment of an exclusive privilege, to the effect that "a legislative grant to a corporation of speeial privileges, if not forbidden by the Constitution, may be a contract; but where one of the conditions of the grant is that the legislature may alter or revoke it, a law altering or revoking, or which has the effect to alter or revoke, the exclusive character of such privileges, cannot be regarded as one impairing the obligation of the contract. The corporation, by accepting the grant subject to the legislative power so reserved by the Constitution, must be held to have assented to such reservation." The principle thus recognized in the earlier case "should," the court declared, "be especially maintained and applied in cases where the taxing power of the state is involved.” 33 Covington v. Kentucky, 173 U. S. 231, 43 L. Ed. 679; Louisville Water Co. v. Clark, 143 U. S. 1, 36 I. Ed. 55; Maine Cent. R. Co. v. Maine, 96 U. S. 499, 24 L. Ed. 836; Tomlinson v. Jessup, 15 Wall. (U. S.) 454, 21 L. Ed. 204. "It is true that the charter of the company when accepted by the corporators constituted a contract between them and the state, and that the amendment, when accepted, formed a part of the contract from that date and was of the same obligatory character. And it may be (qually true, as stated by counsel, that the exemption from taxation added greatly to the value of the stock of the company, and induced the plaintiff to purchase the shares held by him. But these considerations cannot be allowed any weight in determining the validity of the subsequent taxation. The power reserved to the state by the law of 1841 authorized any change in the contract as it originally existed, or as subsequently modified, or its entire revocation. The original corporators, or subsequent stockholders, took their interests with knowledge of the existence of this power, and the possi bility of its exercise at any time in the discretion of the legislature. The object of the reservation, and of similar reservations in other charters, is is nothing in the charter itself to the contrary.34 So, also, the revocation of an exemption under the reserved power may be by a general law.35 When corporations whose property has been exempted from taxation consolidate under legislative authority, and a new corporation. is created, and the original corporations dissolve, the new corporation is subject to a constitutional provision or a general law adopted or enacted after the creation of the original corporations, but before the statute authorizing the consolidation, reserving to the legisla to prevent a grant of corporate rights and privileges in a form which will preclude legislative interference with their exercise if the public interest should at any time require such interference. It is a provision intended to preserve to the state control over its contract with the corporators, which without that provision would be irrepealable and protected from any measures affecting its obligation. # The Immunity from taxation, constituting in these cases a part of the contract with the government, is, by the reservation of power, such as is contained in the law of 1841, subject to be revoked equally with any other provision of the charter whenever the legislature may deem it expedient for the public interests that the revocation shall be made. reservation affects the entire relation between the state and the corporation, and places under legislative control all rights, privileges, and immunities derived by its charter directly from the state. Rights acquired by third parties, and which have become vested under the charter, in the legitimate exercise of its powers, stand upon a different footing; but of such rights it is unnecessary to speak here. The state only asserts in the present case the power under the reservation to modify its own contract with the corporators; it does not contend for a power to revoke the contracts of the corporation with other parties, or to impair any vested rights thereby ac quired." Tomlinson v. Jessup, 15 Wall. (U. S.) 454, 21 L. Ed. 204. See also Covington v. Kentucky, 173 U. S. 231, 43 L. Ed. 679; Louisville Water Co. v. Clark, 143 U. S. 1, 36 L. Ed. 55; Maine Cent. R. Co. v. Maine, 96 U. S. 499, 24 L. Ed. 836. Notwithstanding the fact that the city ordinance which granted a franchise to a street railway company required the company to pave only between its rails, the city, acting under a later-enacted statute, may subsequently assess the company for a width of pavement outside of its rails where the general statute under which the company was incorporated reserved to the legislature the power to alter the company's charter and to subject the enjoyment of its franchises to such conditions as the legislature should deem necessary. Sioux City St. R. Co. v. Sioux City, 138 U. S. 98, 34 L. Ed. 898. 34 The provision in a special charter that the exemption granted shall continue if and so long as the company shall keep a certain sum invested in real property in the state excludes the idea that there is to be read into such charter an existing general statute which reserves to the legislature the right to alter, suspend or repeal in its discretion corporate charters thereafter granted. Singer Mfg. Co. v. Heppenheimer, 58 N. J. I. 633, 32 L. R. A. 643, 34 Atl. 1061. 35 Morris & E. R. Co. v. Miller, 30 N. J. L. 368. ture the power to alter, amend or repeal charters, or withdraw franchises, subsequently granted, and the new corporation is therefore subject to taxation.36 And if a charter granting an exemption from taxation is amended when a general law is in force reserving the right to alter, amend or repeal all charters, and the amendment is accepted by the corporation, the general law is applicable to the corporation under its amended charter, unless the amendment expressly waives the right of amendment or repeal.37 But the constitutional power of the legislature, subject to the vote of the people, to alter, amend or repeal a statute exempting a railroad company from all other taxes on the payment of a percentage of its gross receipts cannot be so exercised as to continue the obligation as to payment of such percentage, and at the same time deny in whole or in part the exemption conferred by the contract, such an exercise of the power being an arbitrary one working a denial of the equal protection of the laws and a deprivation of property without due process of law.38 66 § 4638. Necessity that grant be express. The right of taxation. 'presumptively belongs to the state in regard to every species of property and to an unlimited extent," 39 and in order that there may 36 Atlantic & G. R. Co. v. Georgia, 98 U. S. 359, 25 L. Ed. 185; State v. Northern Central Ry. Co., 44 Md. 131. Where a general statute provides that corporate charters shall be subject to legislative control unless their terms expressly except them therefrom, one corporation does not take the same contractual, and, hence, unrepealable, exemption as has been granted to another corporation by being vested by reference with all of such other's rights, privileges, and immunities, but takes merely an exemption of like extent which the legislature may repeal at its pleasure. Hoge v. Richmond & D. R. Co., 99 U. S. 348, 25 L. Ed. 303. 37 Louisville Water Co. v. Clark, 143 U. S. 1, 36 L. Ed. 55. 38 Duluth & I. R. R. Co. v. St. Louis County, 179 U. S. 302, 45 L. Ed. 201, following Stearns v. Minnesota, 179 U. S. 223, 45 L. Ed. 162. "When a contract is entered into by a state subject to the reserved pow- 39 Pacific R. Co. v. Maguire, 20 Wall. (U. S.) 36, 22 L. Ed. 282. |