§ 519. Extension of the Doctrine of Gelpcke v. Dubuque.

According to the doctrine declared in the Gelpeke case, contract rights acquired under a law which has been held constitutional by the state courts will be protected by the federal courts from impairment by a later decision or decisions of those courts, in cases originating or brought into the lower federal courts because of the diversity of the citizenship of the parties litigant. In later cases this rule has been extended to cover cases where contract rights have been acquired under a state law, presumably valid, which have not had their constitutionality affirmed by the state courts.79

§ 520. Great Southern Fireproof Hotel Co. v. Jones.

In Great Southern Fireproof Hotel Co. v. Jones the authorities are carefully reviewed, and the doctrine definitely stated that the federal courts will not hold themselves concluded by the decisions of state courts holding, though for the first time, state laws unconstitutional, in cases involving contract rights based upon such laws. That is to say, they will determine upon their own independent judgment whether the laws in question are to be held valid as tested by the state constitutions, and if, when so tested, the laws are not in their opinion valid, the contract rights based upon them fall to the ground. The situation is thus quite different from that of the cases arising under the Gelpcke v. Dubuque rule where there have been diverse opinions upon the part of the state. courts. There the contract entered in reliance upon the first decisions upholding the laws concerned are protected without

79 Havemeyer v. Iowa County, 3 Wall. 294; 18 L. ed. 38; Butz v. Muscatine, 8 Wall. 575; 19 L. ed. 490; Township of Pine Grove v. Talcott, 19 Wall. 666; 22 L. ed. 227; Pleasant Township v. Etna Life Insurance Co., 138 U. S. 67; 11 Sup. Ct. Rep. 215; 34 L. ed. 864; Folsom v. Township, 159 U. S. 611; 16 Sup. Ct. Rep. 174; 40 L. ed. 278; Stanly County v. Coler, 190 U. S. 437; 23 Sup. Ct. Rep. 811; 47 L. ed. 1126; Great Southern Fireproof Hotel Co. v. Jones, 193 U. S. 532; 24 Sup. Ct. Rep. 576; 48 L. ed. 778.

80 193 U. S. 532; 24 Sup. Ct. Rep. 576; 48 L. ed. 778.

!

reference to the correctness of the earlier decisions as compared with the later.81

81 In Hotel Co. v. Jones (193 U. S. 532; 24 Sup. Ct. Rep. 576; 48 L. ed. 778) the court say with reference to the general doctrine declared "the only exception to the general rule announced in the above cases arises when the question is whether a particular statute was passed by the legislature in the manner prescribed by the state construction, so as to become a law of the State." It is difficult to see why this exception is made, and, indeed, the authorities which are cited in its support are not appropriate, as in each case previously to the time when the contracts were entered into there had been state decisions with reference to similar laws, holding them void, and the parties thus advised of the doubtful validity of the laws upon which they relied.

CHAPTER XLIX.

CONSTITUTIONAL LIMITATIONS UPON THE TAXING POWERS OF THE STATES.

§ 521. Constitutional Provisions.

The federal Constitution lays but one express limitation upon the States with reference to the exercise of their taxing powers. This is that "no State shall, without the consent of the Congress, lay any imposts or duties on imports or exports, except what may be absolutely necessary for executing the inspection laws; and the net produce of all duties and imposts, laid by any State on imports or exports, shall be for the use of the Treasury of the United States, and all such laws shall be subject to the revision and control of the Congress." 1

But other clauses of the Constitution restricting generally the powers of the States operate to limit their powers of taxation. Thus, for example, influential in this respect are the provisions that no State shall deprive any person of property without due process of law or deny to any person within its jurisdiction the legal protection of the laws; that no State shall pass any law impairing the obligation of contracts; and that "the citizens of each State shall be entitled to all privileges and immunities of citizens in the several States." Also there are the implied limitations that no State shall so use its taxing powers as to interfere with the operation of federal agencies; and that, being unable to give an extraterritorial effect to its laws, no State may tax property not within its jurisdiction.

The limitations imposed upon the taxing powers of the States by the "comity" clause are discussed in chapter XII of this treatise. It may, however, be here said that, in general, the clause operates to prevent a State from burdening citizens of other States within its borders with heavier taxes than those laid upon its own

1 Art. I, Sec. X, Cl. 2.

2 Art. IV, § 2, Cl. 1.

citizens. This applies not only to the property of non-citizens but to the business that they may carry on.3

§ 522. Special Assessments.

The taxing by the State of private property in the form of taxes is held to be justified and not a taking of property for a public use without compensation, upon the theory that compensation is returned in the form of police protection and of other benefits flowing from the existence of the government. A logical extension of this justification permits the State to levy special taxes upon land embraced within a given district where the proceeds of such taxes are to be spent for improvements which, though of general public utility, are yet for the special and peculiar benefit of that district. For, as the court say in Lockwood v. St. Louis, "While the few ought not to be taxed for the benefit of the whole, the whole ought not to be taxed for the benefit of the few. General taxation for a mere local purpose is unjust; it burdens those who are not benefited and benefits those who are exempt from the burden."

4

In similarity to this principle that the property peculiarly benefited by a public improvement may be called upon, by a special assessment, to bear the cost thereof, is the principle that, in assessing the damages, when private property is taken for a public purpose under an exercise of the right of eminent domain, the resulting benefits to the owner from the public use to which his appropriated property is part may be subtracted from the value of the property taken. This right thus to set off benefits was denied by the court of appeals of the District of Columbia in several cases, but the Supreme Court of the United States, in Bauman v. Ross emphatically repudiated the doctrine saying: "The just compensation required by the Constitution to be made to the owner is to be measured by the loss caused to him by the appropriation [of his property]. He is entitled to receive the value of what he has been deprived of and no more. To award

3 Ward v. Maryland, 12 Wall. 418; 20 L. ed. 449.

4 24 Mo. 20.

5 167 U. S. 548; 17 Sup. Ct. 966; 42 L. ed. 270.

him more would be unjust to the public. Consequently, when part only of a parcel of land is taken for a highway, the value of that part is not the sole measure of the compensation or damages to be paid to the owner; but the incidental injury or benefit to the part not taken is also to be considered."

§ 523. Taxes and Special Assessments Distinguished.

6

Special assessments are, properly speaking, taxes, and yet they are of so peculiar a character that the courts have not infrequently refused to bring them within the meaning of the term "tax." Thus where certain corporations or pieces of property have been by law exempted from taxation, they have, nevertheless, been held subject to special assessments. Again, where state Constitutions have provided that taxation shall be equal and uniform, or that all property shall be taxed according to its value, the courts have nevertheless held that special assessments for local improvements. may be levied and assessed according to the front-foot rule or by a standard other than that of value.

Judge Cooley quotes the following from the decision of a Mississippi court in illustration of the distinction between a tax and a special assessment:

"A local assessment can only be levied on land, it cannot, as a tax can, be made a personal liability of the taxpayer; it is an assessment on the thing supposed to be benefited. A tax is levied upon the whole state or a known political subdivision as a county or town. A local assessment is levied upon property situated in a district created for the express purpose of the levy and possessing no other function or even existence than to be the thing upon which the levy is made. A tax is a continuing burden and must be collected at short intervals for all time and without it government cannot exist; a local assessment is exceptional both as to time and locality, it is brought into being for a particular occasion and to accomplish a particular purpose and dies with the passing of the occasion and the accomplishment of the purpose. A tax is

6 Lefevre v. Detroit, 2 Mich. 586; Ill. Cent. R. Co. v. Decatur, 126 Ill. 92. See Mich. Law Review, II, 455.