“NORTHERN CENTRAL RAILWAY COM- [258 PANY, Plff. in Err., v.

STATE OF MARYLAND.

(See S. C. Reporter’s ed. 258-270.)

Contracts — reserved power to alter — amend¬ ment of corporate charter.

A state statute fixing the rate of taxation on the gross receipts of a railroad company, enacted for the purpose of settling by agree¬ ment a pending controversy as to a charter right of the company to exemption from tax¬ ation, must, notwithstanding its contractual form, be regarded as an amendment to such charter, and therefore subject to repeal by reason of a provision of the state Constitu¬ tion in force at the time of its passage, re¬ serving the power to repeal, alter, or amend corporate charters.

[No. 43.]

Argued October 16, 1902. Decided Decem¬ ber 1, 1902.

IN ERROR to the Court of Appeals of the State of Maryland to review a judgment

Note. — As to reserved power to alter, amend,

or repeal corporate charters — see note to Green¬ wood v. Union Freight R. Co. 26 L. ed. U. S.

167

258-201

Supreme Court of the United States.

Oct. Term,

which affirmed a judgment of the trial court denying a claim of a railroad company to a contract exemption from a tax imposed by a statute of the state. Affirmed.

See same case below, 90 Md. 449, 45 Atl. 465, 31 Atl. 1108, 93 Md. 737.

Statement by Mr. Justice White:

The Baltimore & Susquehanna Railroad Company was chartered by an act of the leg¬ islature of Maryland in 1827, with author¬ ity to construct a railroad from the city of Baltimore to the Susquehanna river. The charter contained a provision declaring that the “shares of the capital stock of the com¬ pany should be deemed and considered per¬ sonal estate, and should be exempt from the imposition of any tax or burden.” It was conceded by both parties in the discussion at bar that the effect of this provision, as interpreted by the settled adjudications of the state of Maryland, was to forever ex-

empt the company and *its property from taxation. It was also conceded that at the time this act was passed there was no provi¬ sion in the Constitution of the state of Mary¬ land restricting the legislative power to ex¬ empt, and that no reservation of the power to repeal, alter, or amend was found in the Con¬ stitution of the state, or expressed or im¬ plied in the charter in question. In 1854 an act was passed by the Maryland legisla¬ ture, designated as chapter 250 of the laws of that year. The title of this act was as follows :

“An Act to Authorize the Consolidation of the Baltimore and Susquehanna Railroad Company with the York and Maryland Lin" Railroad Company, the York and Cumber¬ land Railroad Company, and the Susque¬ hanna Railroad Company, by the Name of the Northern Central Railway Company.”

The companies referred to in this title other than the Baltimore & Susquehanna Railroad were corporations owing their ex¬ istence to charters granted by the legislature of Pennsylvania, and which were operating railroads in that state connecting with the Baltimore & Susquehanna. The effect of the consolidation was to create one corporation owning and operating one line of railroad from and across the state of Maryland into and across the state of Pennsylvania. The act of 1854 authorizing the consolidation, the title of which has just been stated, by its first section empowered the stockholders of the Baltimore & Susquehanna Railroad, upon their acceptance of the act, “to unite and to consolidate their company or corpo¬ ration with the York & Maryland Line Rail¬ road, the York & Cumberland Railroad Com¬ pany, and the Susquehanna Railroad Com¬ pany of the state of Pennsylvania, so as to form and constitute one company or cor¬ poration, to be called the Northern Central Railway Company, on such terms and condi¬ tions, and conformably to such agreements and regulations, as the said several com¬ panies shall respectively determine and adopt, subject, nevertheless, to the following general provisions: First, that all existing contracts, engagements, and liabilities of the said Baltimore & Susquehanna Railroad 168

Company shall continue to bind said com¬ pany and its property as fully as before the consolidation herein above authorized, or that the said existing contracts, engage¬ ments, and liabilities shall be duly adopted and 'assumed by the consolidated company

except as herein expressly altered or re¬ scinded; second, tlial^ all laws heretofore made in reference to the said Baltimore & Susquehanna Railroad Company and not re¬ pealed or modified by the legislature of Mary¬ land, and all ordinances relating to said com¬ pany heretofore made and not repealed by the mayor and said council of Maryland, shall be binding and operative upon the said consolidated company, so far as its prop¬ erty or its operations may be within the ju¬ risdiction of the state of Maryland or the city of Baltimore respectively, and so far as the laws or ordinances may be applicable to and consistent with the new oganization of the said consolidated company; third, that the consolidated company shall have power from time to time to establish its capital stock at an amount not exceeding eight mil¬ lions of dollars, the same 'to be represented by such number of shares, and the said con¬ solidated company shall have power to issue their bonds convertible into stock on such terms as the company may prescribe, and to secure the same by one or more mortgages for any such amounts as they may find nec¬ essary for paying off any existing debt of the company.”

After providing for a board of directors and officers of the new or consolidated com¬ pany, the act proceeded to say: “That the company shall make and use a common seal, and possess all the corporate powers and privileges, and be subject to all the duties and obligations, not inconsistent with this act, and its general intent, which are ex¬ pressed in the charter heretofore granted to the said Baltimore & Susquehanna Railroad Company, and its supplements: Provided, that this clause shall not be construed to deprive the parties to the said consolidated company of the right or authority to make such provisions and regulations, notwith¬ standing said original charter and its sup¬ plements, as may be necessary to create and establish said consolidated company, and bring its organization into agreement and consistency with the terms and conditions of the charter of the several companies of which the said consolidated company shall be composed: And provided also, That the parties to the consolidated company shall be authorized and empowered to adopt *and

conform the organization of the said con¬ solidated company to such provisions or en¬ actments as may be required by the legisla¬ ture of the state of Pennsylvania, touching the name of said corporation, and of the board of president and directors in said con¬ solidated company, and the conditions re¬ lating to their appointments.”

The 2d section of the act, among other things, provided that “this act shall take ef¬ fect whenever and as soon as the said par¬ ties hereinbefore referred to shall have agreed to consolidate their several compa¬ nies into one, and shall have settled, deter-

187 U. S.

Northern Central R. Co. v. Maryland.

261-263

mined, and agreed upon the terms and con¬ ditions of such consolidation in conformity with the provisions of this act. . . .”

In pursuance of the authority thus con¬ ferred upon the Maryland corporation, and in virtue of power granted by the legislature of Pennsylvania to the three Pennsylvania corporations, the consolidation was effected, new stock was issued, and a company came into being known as the Northern Central Railway Company, whose affairs were man¬ aged by the new board of directors and offi¬ cers elected or appointed pursuant to the new charter. The corporation, in availing itself of the provisions of the law of 1854, executed articles of consolidation. Al¬ though the act of 1854 only provided that the new corporation should have the corpo¬ rate “powers and privileges” of the con¬ stituent bodies, it is stated in argument that the articles of consolidation executed under the law purported to vest the new corpora¬ tion with, not only the right to the prop¬ erty rights and privileges of the old com¬ panies, but also with their immunities. In 1854, at the time the act of consolidation was passed, the Maryland Constitution (of 1850) was in force, and provided in § 47, article 3, as follows:

“Corporations may be formed under gen¬ eral laws, but shall not be created by spe¬ cial act, except for municipal purposes; and in cases where in the judgment of the legis¬ lature the object of the corporation cannot be attained under general laws. All laws and special acts pursuant to this section may be altered from time to time or re¬ pealed.”

In the years 1872 and 1874 the legislature

of Maryland passed *an act imposing a tax of y2 of 1 per cent upon the gross receipts of all steam railroad companies incorporat¬ ed by the state and doing business therein. Two suits were thereafter (the one in 1873 and the other in 1874 ) brought by the state of Maryland against the Northern Central Rail¬ way Company to recover the y2 of 1 per cent tax upon the gross receipts of that company from that part of its railroad lying in the state of Maryland. The defense of the com¬ pany was substantially, first, that it was entitled to the exemption from taxation granted by the act of 1827 to the Baltimore & Susquehanna Company; that such exemp¬ tion was existing and had not been repealed, and, if repealed, the repealing act was void because an impairment of the obligations of the contract resulting from the act of 1827 and the transmission of its immunities to the new company created by the act of 1854. The causes were decided in the trial court m favor of the corporation. The cases were taken to the court of appeals of the state of Maryland. That court (in 1875) reversed the judgment of the court below, and re¬ manded the cases for a new trial. The court of appeals in its opinion conceded that when, in 1827, the charter of the Baltimore & Susquehanna Railroad Company was grant ed there was no restriction in the Constitu¬ tion of the state on the power of the general assembly to make a contractual exemption from taxation. It also conceded that at 187 U. S.

that time there was no general power re¬ served in the Constitution to repeal, alter, or amend charters, and that no such reser¬ vation was found in the charter of 1827.

But the court deemed it unnecessary to pass upon the question of whether the consolida¬ tion act of 1854 had endowed the new com¬ pany with the exemption from taxation ex¬ pressed in the act of 1827, because, conced¬ ing, arguendo, this to have been the case, it was held that as the consolidation had created a new company with new stock, new franchises, new rights, and new officers, the charter of such newly created company as to all its provisions, including the exemp¬ tion from taxation, if such exemption were found in it expressly or by implication, was subject to the power to repeal, alter, and amend, reserved by the Constitution. Con¬ struing the acts imposing the tax which were sued for in connection with *other laws

of the state of Maryland, the court held that the exemption from taxation had been re¬ pealed. 44 Md. 162.

The cause on being remanded to the trial court remained untried in 1880. In that year the legislature of Maryland passed an act on the subject of the taxation of the Northern Central Railway Company. The title of that act purported to adjust and settle finally by agreement all pending con¬ troversies on the subject of taxation between the state of Maryland and the railroad com¬ pany. The preamble referred to and reca¬ pitulated the organization of the Baltimore & Susquehanna, the consolidation by the act of 1854, and the pending suits on the sub¬ ject. The title and preamble are reproduced in the margin.f

TAU Act to Adjust and Settle Finally, by Agree-

ment, All Tending Controversies between the State of Maryland and the Northern Central Railway Company, by Subjecting the Franchises and Property of Said Company within This State to Taxation for State Pur¬ poses to a Certain Extent, and by Providing for the Payment of a Certain Indebtedness Claimed by' the State of Maryland to Exist on the Part of Said Northern Central Rail¬ way Company to Said State of Maryland, being an Act Supplementary to the Act of Eighteen Hundred and Fifty-Four, Chapter Two Hundred and Fifty, Entitled An Act to Authorize the Consolidation of the Balti¬ more and Susquehanna Railroad Company with the York and Maryland Line Railroad Company, the York and Cumberland Rail¬ road Company, and the Susquehanna Rail¬ road Company, by the Name of the Northern Central Railway Company.

Whereas, a controversy has arisen and exists between the state of Maryland and the Northern Central Railway Company in reference to the rights of the state of Maryland to subject to taxation the franchises and property of the Northern Central Railway Company, the said company claiming exemption of the same from taxation upon the grounds that among the terms and conditions of the union and consol¬ idation of the several companies by which said Northern Central Railway Company was formed is one, that the latter should have all the rights, privileges, and immunities of each of said companies, which said terms were en¬ tered into under the authority given by the act of Maryland of eighteen hundred and fifty-four,

264-266

Supreme Court of the United States.

Oct. Term,

*By the 1st section of the act it was pro voided that the Northern Central Railway Company “shall have and possess all the pow¬ ers, rights, privileges, and immunities, and be subject to all the duties and obligations, which are expressed in the act of assembly of Maryland of 1827, chapter 72, entitled, An Act to Incorporate the Baltimore & Sus¬ quehanna Railroad Company, and all the franchises and property of every descrip¬ tion and gross receipts of said Northern Central Railway Company within the state of Maryland, shall be subject to taxation for state purposes to the extent of an annual tax of one half of one per cent upon the gross receipts from its railroad and fran¬ chise lying within the state of Maryland, and from all other sources within this state, and said franchises, property, and gross re¬ ceipts shall not be subject to any other tax under the laws of the state of Maryland;

. . .” The act further provided for the

payment of a designated sum by the railroad company for past taxes, declared said pay¬ ment should acquit such taxes, and directed the discontinuance of all suits pending against the company for such taxes. It was, however, provided that its provisions should not be operative until the payment which the act required had been made and

until the acceptance *of the provisions of the act by the stockholders of the company. The act was accepted, the money was paid, and the suits were discontinued. At the time of the passage of this act of 1880 the Con¬ stitution of Maryland of 1867 was in force, and therein it was provided (art. 3, § 48) : “Corporations may be formed under gen¬ eral laws, but shall not be created by special act, except for municipal purposes and except in cases where no general laws exist providing for the creation of cor¬ porations of the same general character as the corporation proposed to be created, and any act of incorporation passed in violation of this act shall be void. . . . All char¬

ters granted or adopted in pursuance of this section, and all charters heretofore granted and created, subject to repeal or modifica¬ tion, may be altered from time to time, or be repealed.” In accordance with the act of 1880 the company year by year paid the tax on its gross receipts.

In 1890 the state of Maryland passed a general law entitled “An Act to Provide for State Taxation on the Revenues of Rail¬ road, Telegraph, or Cable, Express or Trans¬ portation, Telephone, Parlor Car, Sleeping Car, Safe Deposit, Trust, Guaranty, Fidel¬ ity, Oil or Pipe Line, Title, Insurance, Elec¬ tric Light or Electric Construction Compa¬ nies Incorporated under Any General or Special Law of This State and Doing Busi¬ ness Therein.” [Md. Laws, chap. 559.] By this act a tax of 1 per cent was imposed upon the gross receipts “of all railroad com¬ panies worked by steam incorporated by or under the authority of this state and doing business therein.” Under the asserted au¬ thority of this statute a tax of 1 per cent was levied by the state in each of the years 1891 to 1895, both inclusive, upon the gross receipts of the Northern Central Railway Company for the year preceding, and these taxes were paid by the company under pro¬ test. Upon demand, however, being made in 1896 for payment of the tax of 1 per cent upon the gloss receipts for the year 1895, compliance was refused. 'A tender by the company of the taxes, calculated at the rate of y3 of 1 per cent, was refused by the state, and the present action was thereupon brought to recover the taxes thus asserted to be due and payable under the act of 1890.

The company defended on the ground that the act of 1880 was a contract ’protecting it[266J from a higher rate of tax on its gross re ceipts than in that act specified; that the act had not been repealed; that if repealed the repealing statute was void, because it impaired the obligations of the contract re¬ sulting from the act of 1880. There was judgment in favor of the corporation. The case was taken to the court of appeals of the state of Maryland and the judgment was reversed, the court holding that the provi¬ sions of the act of 1880 had been repealed by state statutes to which it referred, and that the repeal did not violate the Consti¬ tution of the United States by impairing the obligations of the contract, as asserted by the company, because the corporation held its rights subject to the power to repeal, al¬ ter, and amend, as reserved in the Constitu¬ tion at the time both the acts of 1854 and 1880 were passed. 90 Md. 449, 45 Atl. 465.

chapter two hundred and fifty, which, more¬ over, declared that said Northern Central Rail¬ way Company should have all the powers and privileges expressed in the charter granted by the state of Maryland to the Baltimore & Sus¬ quehanna Railroad Company, among which privileges and immunity from taxation.

And whereas, the state of Maryland having, by the act of eighteen hundred and seventy- two, chapter two hundred and thirty-four, and the act of eighteen hundred and seventy-four, chapter four hundred and eight, imposed an an¬ nual tax of one half of one per centum on the gross receipts of all railroad companies worked by steam incorporated by or under the au¬ thority of said state of Maryland, and claim¬ ing that under said acts the gross receipts of said Northern Central Railway Company are liable to said tax, have instituted suits to re¬ cover the same.

And whereas, the property of said company

has been also assessed as liable to taxation for county and municipal purposes.

And whereas, the said company has the right to have the question at issue between it and the state of Maryland carried to the Supreme Court of the United States to be there decided.

And whereas, it has been represented to this general assembly that what would be the ulti¬ mate decision of said question is a matter of great doubt, and it is deemed to be, moreover just and proper that an equitable settlement should be made of the matters so in con¬ troversy, and it having been represented to this general assembly that the said Northern Cen¬ tral Railway Company, for the purpose of making such settlement, is willing to pay a tax of one half of one per centum on the gross re¬ ceipts within this state, niton the terms and conditions hereinafter set forth ; now, ther°- fore —

187 U. S.

Northern Central R. Co. v. Maryland.

266

The case was remanded for a new trial. It was again tried, the Federal defense of the impairment of the obligation of the contract was again specially urged, the case was de¬ cided against the corporation, was taken again to the supreme court of the state of Maryland. That court, adhering to its for¬ mer view, affirmed the judgment. It is to this judgment that the present writ of error is prosecuted.

Mr. Bernard Carter argued the cause and filed a brief for plaintiff in error:

The title of an act may be considered in ascertaining the intention of the legislature.

Church of Holy Trinity v. United States, 143 U. S. 462, 36 L. ed. 229, 12 Sup. Ct. Rep. 511.

The preamble is often a key to the proper understanding of the statute.

Coosaic Min. Co. v. South Carolina, 144 U. S. 562, 36 L. ed. 542, 12 Sup. Ct. Rep.

A state, unless prohibited by its Consti¬ tution, may make a contract with a corpora¬ tion chartered by it, to exempt all of its property from taxation, or agree to accept from it a less rate of taxation than that to be imposed on others, either for a specified time or permanently, if such contract has a sufficient consideration to support it.

Delaware Railroad Tax, 18 Wall. 225, sub nom. Minot v. Philadelphia, W. d B. R. Co. 21 L. ed. 894; Ohio Life Ins. & T. Co. v. Debolt, 16 How. 428, 14 L. ed. 1002 ; Piqua Branch of State Bank v. Knoop, 16 How. 389, 14 L. ed. 985; Home of the Friendless v. Rouse, 8 Wall. 437, 19 L. ed. 497 ; Appeal Tax, Court v. Grand Lodge, A. F. d A. M. 50 Md. 428.

Where a state grants a charter to a cor¬ poration, which is accepted, and therein stip¬ ulates for an exemption of its property from taxation, partial or total, and the Constitu¬ tion of the state does not prohibit such ex¬ emption, a valid contract for such exemption is made.

Home of the Friendless v. Rouse, 8 Wall. 437, 19 L. ed. 497.

It is entirely competent for a state, un¬ less prohibited by its Constitution, to make an agreement with a corporation, subsequent to its charter, for an exemption of its prop¬ erty from taxation, partial or total ; and such an agreement constitutes a valid con¬ tract if supported by a consideration of some kind.

Appeal Tax Court Grand Lodge, A. F. & A. M. 50 Md. 428 ; Christ Church v. Phila¬ delphia County, 24 How. 300, 16 L. ed. 602; Tucker v. Ferguson, 22 Wall. 528, 22 L. ed.

At the time of the passage of the act of 1880, chap. 16, there was nothing in the Constitution of Maryland, nor has there ever been anything in any of the Constitutions of Maryland, which prohibited the state from exempting the property of a particular corporation from taxation, either total or partial.

The Tax Cases, 12 Gill & J. 117; Balti¬ more v. Baltimore d 0. R. Co. 6 Gill, 288,

187 U. S.

48 Am. Dec. 531; Philadelphia, W. & B. R. Co. v. Bayless, 2 Gill, 355 ; Appeal Tax Court, v. Grand Lodge, A. F. d A. M. 50 Md. 428.

Plenary power in the legislature of the state for all purposes of civil government is the rule, and the prohibition to exercise a particular power is the exception.

Cooley, Const. Lim. p. 104; Baltimore v. State ex rel. Bd. of Police, 15 Md. 387, 74 Am. Dec. 572; Jackson v. Walsh, 75 Md. 315, 23 Atl. 778.

Messrs. Louis E. McComas and George

R. Gaither argued the cause and filed a brief for defendant in error :

The preamble is no part of an act; it can¬ not enlarge or confer powers, or control the words of the act unless they are doubtful or ambiguous.

Yazoo d M. Valley R. Co. v. Thomas, 132 U. S. 174, 33 L. ed. 302, 10 Sup. Ct. Rep.

An immunity from taxation by a state will not be recognized unless granted in terms too plain to be mistaken.

Phoenix F. d M. Ins. Co. v. Tennessee, 161 U. S. 174, 40 L. ed. 660, 16 Sup. Ct. Rep.

The act of 1880, chap. 16, does not con¬ stitute an irrepealable immunity from ad¬ ditional or greater taxation.

Citizens’ Saw. Bank v. Owensboro, 173 U.

S. 644, 43 L. ed. 843, 19 Sup. Ct. Rep. 530; Covington v. Kentucky, 173 U. S. 231, 43 L. ed. 679, 19 Sup. Ct. Rep. 383; Ford v. Delta d P. Land Co. 164 U. S. 662, 41 L. ed. 590, 17 Sup. Ct. Rep. 230; Yazoo d M. Valley R. Co. v. Thomas, 132 U. S. 175, 33 L. ed. 303, 10 Sup. Ct. Rep. 68; Wilmington d W. R. Co. v. Alsbrook, 146 U. S. 279, 36 L. ed. 972, 13 Sup. Ct. Rep. 72; Hoge v. Richmond d D. R. Go. 99 U. S. 348, 25 L. ed.

If by the just interpretation of the al¬ leged contract there was no exemption from taxation, then there is no Federal question to be here reviewed.

St. Paul Gaslight Co. v. St. Paul, 181 U. S. 151, 45 L. ed. 793, 21 Sup. Ct. Rep. 575.

Even in a case where the Supreme Court of the United States may exercise an inde¬ pendent judgment, any reasonable doubt will be resolved in favor of that construc¬ tion of a state statute which has been adopted by the court of last resort in that state.

Yazoo d M. Valley R. Co. v. Adams, 181 U. S. 582, 45 L. ed. 1012, 21 Sup. Ct. Rep. 729; Burgess v. Seligman, 107 U. S. 20, 27 L. ed. 359, 2 Sup. Ct. Rep. 10; Flash v. Conn, 109 U. S. 371, 27 L. ed. 966, 3 Sup. Ct. Rep. 263; Clark v. Sever, 139 U. S. 96, 35 L. ed. 88, 11 Sup. Ct. Rep. 468; Board of Liquidation of City Debt v. Louisiana, 179 U. S. 622, 45 L. ed. 347, 21 Sup. Ct. Rep.

Mr. Justice White, after making the foregoing statement of the case, delivered the opinion of the court:

In order to confine the controversy aris¬ ing on this record to the propositions upon which its decision must really rest to elim-

171

266-269

Supreme Court of the United States.

Oct. Term,

inate the questions discussed at bar, which are either irrelevant or so effectually fore¬ closed by prior decisions of this court as to be no longer open to controversy, the follow¬ ing propositions are stated:

First. Where a contract is claimed to arise from a state law, and it is held below that a subsequent statute has repealed the

‘alleged contract, and effect is thereby given to the subsequent law, the mere question whether the alleged contract has been re¬ pealed by the subsequent law is a state, and not a Federal, question. In such a case this court concerns itself, not with the ques¬ tion whether the state law, from which the contract is asserted to have arisen, has been repealed, but proceeds to determine whether the repeal was void because it produced an impairment of the obligations of the con¬ tract within the purview of the Constitution of the United States. In other words, where the state court has given effect to a subse¬ quent law, this court decides whether such effect, so given by the state court, violates the Constitution of the United States. Gulf <£- 8. I. R. Co. v. Hewes, 183 U. S. 66, 46 L. ed. 86, 22 Sup. Ct. Rep. 26. We there¬ fore put out of view the question whether the acts of 1854 or of 1880 were repealed by the subsequent state statutes as held by the court below, and, treating such repeal as an accomplished fact, shall determine whether tne repealing acts were void because impair¬ ing the obligations of the contract relied upon, in violation of the Constitution of the United States. In considering this ques¬ tion, it will be borne in mind that it is ele¬ mentary that where the constitution of a state reserves the right to repeal, alter, or amend, all charters granted by the legisla¬ ture are subject to such provision, and there¬ fore are wanting in that attribute of irrevo¬ cability which is essential to bring them within the intendment of the clause of the Constitution of the United States protecting contracts from impairment. The cases sup¬ porting this doctrine are so numerous that they need not be cited. We content our¬ selves, therefore, by referring to one of them: Citizens’ Rav. Rank v. Owensboro, 173 U. S. 636, 641, 43 L. ed. 840, 842, 19 Sup. Ct. Rep. 530. It is, moreover, conclu¬ sively determined that where the constitu¬ tion of a state reserves the power to repeal, alter, or amend a charter, such provision is applicable to the charter of a consolidated corporation where, as the result of the con¬ solidation, a new corporation takes being, new stock is provided for, new franchises are conferred, and new Officers appointed. In other words, that where a legislature is inhibited by the constitution from making an irrepealable charter it cannot create a new contract and bring into being a new cor- [268jporation, and yet *by the charter of such corporation give rise to the irrepealable con¬ tract which the constitution absolutely pro¬ hibits. To state the doctrine in another form, it is this: That where a new corpo¬ ration is chartered, subject to a constitu¬ tion which forbids the granting of an irre¬ pealable right, such new corporation cannot 172

become endowed by the effect of a legislative contract with an irrepealable right forbid¬ den by the constitution. If one of the con¬ stituent elements of the corporation pos¬ sessed, prior to the formation of the new corporation, such right, and under the as¬ sumption that the right itself passed to the new body, it loses its irrepealable character, because the new corporation is subject by the very law of its being to the provision of the constitution forbidding irrepealable grants.

The doctrine as just stated has been so frequently declared by this court that it is no longer open to discussion. The whole subject has been so recently fully reviewed and restated, it is sufficient to refer to that case: Yazoo & M. Valley R. Co. v. Adams,

180 U. S. 1, 17, 45 L. ed. 395, 405, 21 Sup.

Ct. Rep. 240 et seq., and authorities there cited.

Coming to apply the principles just stated to the case before us, it is apparent that un¬ less there is something peculiar in this case which takes it from under the control of the doctrine referred to, that the court below correctly held that the new corporation cre¬ ated by the act of 1854 had no irrepealable contract exempting it from taxation either as the result of the act of 1854 or of the act of 1880. The positive prohibition exist¬ ing in the Constitution of the state against irrepealable charter grants, both when the act of 1854 and the act of 1880 were passed, renders •>ny other conclusion impossible.

But it is insisted that, as the Constitution of 1867, which was in force when the law of 1880 was enacted, reserved the right to re¬ peal, alter, or amend only charters granted or adopted, the act of 1880 did not come within the right to repeal or amend because it was not a charter, but a contract entered into between the state and the corporation.

True, the act of 1880 was put, not in the form of a charter amendment, but in that of a contract. The lower court, after quot¬ ing from the opinion rendered by it, when the case was before it under the act of 1854 (44 Md. 162) said:

‘“It is to be observed that the court does

not rest the inability of the legislature to grant to a corporation an irrepealable ex¬ emption from taxation upon the form or character of the particular statute then un¬ der consideration, but puts it upon the broad ground of the want of power in the legisla¬ ture under the Constitution to make such a grant at all. The court certainly in effect determines that any form of law which grants to a corporation such a corporate privilege as immunity from taxation is one passed pursuant to the section of the Con¬ stitution referred to, and is therefore sub¬ ject to alteration or repeal by future legis¬ latures” b

Without pausing to consider whether, as contended, the rule as thus announced may have been in some respects too broadly stat¬ ed, we think it clear that the mere form adopted by a legislature in conferring a right on a corporation cannot be controlling, for if it were so the provision of the Con-

187 U. S.

Evans v. Nellis.

269-271

stit.ution, instead of being commanding and prohibitive, would merely be precatory or advisory. We are also clearly of the opin¬ ion that the act of 1880, in its essential na¬ ture and effect, in whatever form couched, was intended to be and necessarily operated as an amendment to the charter of the com¬ pany created by the act of 1854. Such be¬ ing its essential nature and necessary ef¬ fect, we think it plainly came within the provisions of the Constitution of 1867, and was therefore subject to repeal, alteration, or amendment.

It is strenuously, however, insisted that this case should not be controlled by the rea¬ sons previously stated because of the follow¬ ing considerations: The decision of the court of appeals of Maryland under the act of 1854 (44 Md.), it is urged, was not unani¬ mous. There was an elaborate dissent. Eor this reason, and because the case was open to review in this court on the question of the impairment cf the obligations of the con¬ tract, it is said there was necessarily grave doubt as to the rights of the parties. In view of the foregoing conditions and of such doubt, the act of 1880 embodied but an hon¬ est effort by way of contract and compro¬ mise to close the doubtful controversy in the interest of both parties, the state on the one hand and the corporation on the other;

hence the act of 1880 was *not subject to re¬ peal, alteration, or amendment. Conceding, arguendo, the premise upon which the above deduction is based, the conclusion itself is devoid of foundation. It but reiterates in another mode of statement the argument that the form in which a contract is couched, and not its substance and necessary effect, is the criterion by which to ascertain whether it is controlled by the constitutional provision forbidding irrepealable contracts. Moreover, it disregards the elementary prin¬ ciple that the power < d grant an irrepeal- ablo right by a compromise agreement de¬ pended on the existence of the authority to make such grant by original action. The power to compromise on the subject was as limited as the power to contract originally. District of Columbia v. Bailey (1897) 171 U. S. 161, 43 L. ed. 118, 18 Sup. Ct. Rep.

branch of the case, reiterated in many forms, amounts but to the contention, when ultimately considered, that because the act of 1880 is asserted to have been enacted with the view of settling what was honestly deemed to be a pending and serious contro¬ versy, it was unwise, and it may be unjust to repeal it. Pretermitting the infirmity in the proposition which naturally is suggested by the fact that shortly after the decision in 44 Md. this court decided that the pos¬ session of the rights and privileges of a for¬ mer corporation did not endow a new corpo¬ ration with an exemption from taxation en¬ joyed by the old ( Morgan v. Louisiana [1876] 93 U. S. 217, 23 L. ed. 860), and putting out of view the other cases to the same effect, decided by this court prior to 1880, the proposition is untenable. It but invokes reasons of expediency or policy. 187 U. S.

Into these considerations we may not en¬ ter; we are concerned alone with the ques¬ tion of power, and on passing on such ques¬ tion cannot hold that an act which by the very terms of the state Constitution was made repealable, nevertheless engendered an irrepealable contract protected from impair¬ ment by the Constitution of the United States.

Affirmed.