sinking fund of said city, by the said com¬ pany, within thirty days after the same be¬ comes payable, according to the decision aforesaid, and applied to the reduction of the debt of said city;” third, in chap. 508 of the Laws of 1874, which granted the right to “construct, operate, maintain, and use railways” in certain streets in the city of New York, and provided that “the said persons, or their assigns, shall annually, on the first day of November, pay into the treasury of the city of New York 1 per cent of the gross receipts of the road herein pro¬ vided for, the amount of which gross re¬ ceipts shall be determined by the sworn statement of the president and treasurer of said railway, but subject to the inspection of its books by the comptroller of the city of New York.”
Subsequent to the law of 1884, above re¬ ferred to, fifteen other franchises now be¬ longing to the relator were granted by the common council of the city of New York. Most of them provided for annual payment to the city of New York of either a fixed amount or a fixed percentage, varying from 2 to 8 per cent of the gross earnings.
Mr. William D. Guthrie argued the cause and filed a brief for plaintiff in error:
There is now presented to the court for interpretation a long series of contracts en¬ tered into by the city of New York with the plaintiffs in error or their predecessors, un¬ der direct authority of the legislature, which specifically fix the amount to be annually paid for the special franchises now sought to be further taxed, and which contracts have been fully performed by the railway companies. Under the settled law of the state, these contracts constitute irrevocable agreements, which the legislature itself can¬ not annul, even under the reserved power to alter or amend charters.
People v. O’Brien, 111 N. Y. 1, 2 L. R. A. 255, 7 Am. St. Rep. 084, 18 N. E. G92.
199 U. S.
1904. New York ex rel. Metropolitan Street R. Co. v. State Bd. oe Tax Comrs.
And it has also long been the settled law of the state, in the light of which the agree¬ ments clearly were made, that an ordinance duly accepted constitutes a contract, and that, if it provides for a fixed tax, such as a license fee, the - amount thereof cannot be increased by the city without impairing the obligation of the contract, although the ordinance may not have stipulated that the particular tax provided for should not be increased.
Neic York v. Second Ave. R. Co. 32 N. Y. 261; New York v. Third Ave. R. Co. 33 N. Y. 42.
These two cases established the doctrine in New York that a city could not exact ad¬ ditional compensation or payments by subse¬ quent ordinance beyond what was reserved or stipulated for at the time, without vio¬ lating the contract rights of the grantee of a franchise; and in this respect the cases have not been overruled in that state, and have been frequently cited in other jurisdic¬ tions.
If the legislature had itself granted the franchise by a statute providing that the grant was upon condition that the grantee should pay a fixed amount per annum or a fixed percentage in consideration of the grant, and had required the express accept¬ ance by the grantee of such terms and con¬ ditions, no one for a moment would think of suggesting that the statute did not evi¬ dence and constitute a valid and binding contract as between the grantee and the state, or that the contract was not pro¬ tected against impairment, by the Constitu¬ tion of the United States.
Lang don v. New York, 93 N. Y. 129.
It is, of course, elementary that what is implied is as much a part of a contract or statute as what is expressed; and therefore that whatever by correct legal reasoning is fairly contemplated by the parties, and fair¬ ly within the obligation assumed on the one side or the other, is as binding and eff ectual as if stated in express language.
United States v. Babbit, 1 Black, 55, 61, 17 L. ed. 94; Jones v. Kent, 80 N. Y. 585.
Indeed, it is a cardinal rule, in drafting contracts and statutes, not to express what is implied in law. Expressio eorum quee tacite insunt nihil operatur.
Broom, Legal Maxims, 8th Am. ed. p. 669.
The expression of what is implied in law is denominated by Lord Bacon clausula inutilis.
See also 2 Parsons, Contr. 9th ed. *514.
The general rule undoubtedly is that con¬ tracts with states or municipalities are so to be construed that an exemption from fu-
199 U. S.
ture taxation or regulation of rates is not to be implied unless in reason necessary to give effect to the agreement, or, as it has been authoritatively stated, “unless within the express letter or the necessary scope of the exempting clause.”
Ford v. Delta & P. Land Co. 164 U. S. 662, 666, 41 L. ed. 590, 592, 17 Sup. Ct. Rep.
230.
But if a contract specifically provides for a fixed tax or rate, is it not implied in law that such express stipulation is exclusive and covers the present and future as fully as if the contract expressly so recited? Has it ever been seriously intimated that, where a particular tax has been the subject-matter of a valid contract fixing it, such tax could be increased without impairing the con¬ tract? Has it ever been held that, where a charter provides for the right to collect an agreed and fixed amount of toll or rate, the legislature or city could modify that pro¬ vision at will, and change the toll or rate?
The rule as to strict construction of char¬ ters arose in connection with grants, which were donations “'flowing from the bounty of the Crown.” But when the grant is upon valuable consideration, imposing pecuniary and other obligations upon the grantee, to which he is bound by a valid contract, good sense and justice require that the grant should be construed according to the rules of legal reasoning which govern all con¬ tracts, and which the experience and wisdom of generations have shown to be just as be¬ tween man and man.
Charles River Bridge v. Warren Bridge, 11 Pet. 420, 597, 611, 9 L. ed. 773, 844, 849, dissenting opinion; Hyman v. Read, 13 Cal. 444; Richmond, F. d P. R. Co. v. Louisa R. Co. 13 How. 71, 86, 14 L. ed. 55, 62; Thomp¬ son v. People, 23 Wend. 537 ; Langdon v. New York, 93 N. Y. 129; Huidekoper v. Douglass, 3 Cranch, 1, 70, 71, 2 L. ed. 347, 369 ; Davis v. Cray, 16 Wall. 203, 232, 21 L. ed. 447, 457.
The mere fact that the original statute or contract does not call a fixed annual pay¬ ment or exaction a tax can make no dif¬ ference. The substance, and not the nomen¬ clature, determines the legal nature of the payment to be made. If the statute in the present case had called the obligation a tax, it would not have constituted it such h*ad its nature been otherwise. The name, in a word, is wholly immaterial.
People ex rel. Western U. Teleg. Co. v. Dolan, 126 N. Y. 166, 12 L. R. A. 251, 27 N. E. 269.
Nor does the fact that a specific sum or percentage is payable into the sinking fund of a city change its nature as a tax.
Pacific R. Co. v. Maguire, 20 Wall. 36, 44, 22 L. ed. 282, 286.
69
Supreme Court of the United States.
There can be no reasonable doubt that, according to common understanding, a'n an¬ nual sum paid or exacted for a franchise, right, or privilege, such as the right to use the streets of a city or the highways of a town, is essentially a tax, and that this is particularly true in the state of New York.
Heerwagen v. Crosstown Street R. Co. 179 N. Y. 99, 71 N. E. 729, 90 App. Div. 275, 86 N. Y. Supp. 218. See also State ex rel. Wyatt v. Ashbrook, 154 Mo. 375, 48 L. R. A. 265, 77 Am. St. Rep. 765, 55 S. W. 627.
The primary definition of a “toll” by Webster is: — “A tax paid for some liberty or privilege, particularly for the privilege of passing over a bridge or on a highway, or for that of vending goods in a fair, market, or the like.”
This definition was quoted with approval by the New York court of appeals in the case of Pennsylvania Coal Co. v. Delaware & ff. Canal Co. 3 Abb. App. Dec. 470.
So also in the Century Dictionary the pri¬ mary meaning of “toll” is stated as “a tax paid, or duty imposed, for some use or priv¬ ilege or other reasonable consideration.”
See also Cooley, Taxn. 3d ed. pp. 110, 111; Cooley, Const. Lim. 7th ed. p. 713.
The payment imposed upon corporations, of a fixed annual percentage on their gross or net receipts or earnings, for the privilege of exercising franchises, is essentially a tax.
Maine v. Grand Trunk R. Co. 142 U. S. 217, 227, 35 L. ed. 994, 995, 3 Inters. Com. Rep. 807, 12 Sup. Ct. Rep. 121, 163; Union Bank v. State, 9 Yerg. 490; Atty. Gen. v. Bank of Charlotte, 57 N. C. (4 Jones, Eq.)
287.
The word “rental” appears for the first time in N. Y. Laws 1886, chap. 642, and is then used in the phrase, “rental or per¬ centage of gross earnings agreed upon.” Al¬ though, taken by itself, this phrase might indicate that the legislature was expressing alternative and equivalent senses of the same thing, nevertheless, the different terms undoubtedly referred to different things, in view of the fact that they had been treated as such in all the legislation, and are still treated as distinct and separate. “Or” in such a case frequently means “and.”
United States v. Fisk, 3 Wall. 445, 447, 18 L. ed. 243, 244; People ex rel. Municipal Gas Co. v. Rice, 138 N. Y. 151, 33 N. E. 846.
The contemporaneous and subsequent practical interpretation by the executive de¬ partment of the state, from Governor Cleve¬ land in 1884 to Governor Roosevelt in 1899, by the legislature itself in the present stat¬ ute, and by the highest court of the state in the Heertvagcn Case, 179 N..Y. 99, 71 N. E. 729, most persuasively shows that it was the intent of the legislature to provide a tax, and nothing else, and that the payments are 70
Oct. Term,
in fact existing taxes, as Governors Cleve¬ land and Roosevelt called 'them, or “in the nature of a tax,” as the legislature itself denominated them.
As to the force of the legislative character¬ ization of such payments as “in the nature of a tax” see —
Alexander v. Alexandria, 5 Cranch, 1, 8, 3 L. ed. 19, 21; United States v. Freeman, 3 How. 556, 564, 11 L. ed. 724, 727; Stock- dale v. Atlantic Ins. Co. 20 Wall. 323, 331, 22 L. ed. 348, 351 ; Cope v. Cope, 137 U. S. 682, 688, 34 L. ed. 832, 834, 11 Sup. Ct. Rep. 222 ; People ex rel. Buckley v. Benton, 29 N. Y. 534; Smith v. People, 47 N. Y. 330; Peo¬ ple ex rel. Westchester F. Ins. Co. v. Daven¬ port,
91 N. Y. 574.
The contemporaneous, practical interpre¬ tation by Governor Cleveland in 1884, in the light of which the contracts were made, sup¬ plemented, as it is, by the declarations of Governor Roosevelt in 1899, is likewise en¬ titled to almost the force of law.
Citizens’ Bank v. Parker, 192 U. S. 73, 81, 48 L. ed. 346, 354, 24 Sup. Ct. Rep. 181; Potter v. Hall, 189 U. S. 292, 298, 300, 47 L. ed. 817, 820, 821, 23 Sup. Ct. Rep. 545; Southern P. R. Co. v. Bell, 183 U. S. 675, 682, 685, 46 L. ed. 383, 387, 388, 22 Sup. Ct. Rep. 232; Hewitt v. Schultz, 180 U. S. 139, 156, 157, 45 L. ed. 463, 472, 21 Sup. Ct. Rep. 309; United States v. Pugh, 99 U. S. 265, 269, 25 L. ed. 322, 323. See also Easton v. Pickersgill, 55 N. Y. 310; People ex rel. Wil¬ liams v. Dayton, 55 N. Y. 367 ; Power v. Athens, 99 N. Y. 592, 2 N. E. 609; Re Wash¬ ington Street Asylum R. Co. 115 N. Y. 442, 22 N. E. 356; Jennings v. Van Schaick, 108 N. Y. 530, 2 Am. St. Rep. 459, 15 N. E. 424; Babbage v. Powers, 130 N. Y. 281, 14 L. R. A. 398, 29 N. E. 132; Lewis’s Sutherland Stat. Constr. § 474.
The true inquiry in all such cases as those at bar is whether the language used would justify the opinion that the power of taxa¬ tion was in the view of either of the parties, and that an exemption of it was intended, though not expressed.
New Jersey v. Yard, 95 U. S. 104, 115, 116, 24 L. ed. 352, 354, 355; Providence Bank v. Billings, 4 Pet. 514, 560, 7 L. ed. 939, 955.
A franchise from the legislature cannot subsequently be taxed if a price has been paid for it, which the legislature has ac¬ cepted.
Gordon v. Appeal Tax Court, 3 How. 133, 11 L. ed. 529.
Although this case has been distinguished and limited, it has never been criticized upon the points now involved.
West River Bridge Co. v. Dix, 6 How. 507, 542, 12 L. ed. 535, 549 ; Planters’ Bank v. Sharp, 6 How. 301, 332, 12 L. ed. 447, 460;
199 U. S.
1904. New York ex rel. Metropolitan Street R. Co. v. State Bd. of Tax Comrs.
Ohio L. Ins. d T. Co. v. Debolt, 16 How. 416, 429, 14 L. ed. 997, 1002,; Home of the Friendless v. Rouse, 8 Wall. 430, 438, 19 L. edj 495, 498 ; East Saginaw Salt Mfg. Co. v. East Saginaw, 13 Wall. 373, 376, 20 L. ed. 611, 613; Erie R. Co. v. Pennsylvania, 21 Wall. 492, 498, 22 L. ed. 595, 598; New Or¬ leans Gaslight Co. v. Louisiana Light d H. P. Mfg. Co. 115 U. S. 650, 664, 665, 29 L. ed. 516, 521, 522, 6 Sup. Ct. Rep. 252; Freeport Water Co. v. Freeport, 180 U. S. 587, 608, 45 L. ed. 679, 692, 21 Sup. Ct. Rep. 493, dissenting opinion; Shelby County v. Union d Planters’ Bank, 161 U. S. 149, 159, 40 L. ed. 650, 655, 16 Sup. Ct. Rep. 558 ; Pearsall v. Great Northern R. Co. 161 U. S. 646, 662, 40 L. ed. 838, 843, 16 Sup. Ct. Rep. 705; Citizens’ Bank v. Parker, 192 U. S. 73, 90, 48 L. ed. 346, 358, 24 Sup. Ct. Rep. 181, dissenting opinion; Grand Lodge, F. d A. M. v. New Orleans, 166 U. S. 143, 146, 41 L. ed. 951, 952, 17 Sup. Ct. Rep. 523.
Where a fixed and specific tax has been stipulated for and agreed upon, that particu¬ lar tax may not be increased by subsequent legislation, although such particular tax does not prevent the imposition of other taxes.
Union Bank v. State, 9 Yerg. 490. See also Atty. Gen. v. Bank of Charlotte, 57 N. C. (4 Jones, Eq.) 287 ; New Orleans v. South¬ ern Bank , 11 La. Ann. 41 ; State v. Southern Bank, 23 La. Ann. 271; New Orleans v. People’s Bank, 32 La. Ann. 82;
Penrose v. Chaffraix, 106 La. 250, 30 So. 718; De¬ troit Citizens’ Street R. Co. v. Detroit, 125 Mich. 673, 84 Am. St. Rep. 589, 85 N. W. 96, 86 N. W. 809 ;
Los Angeles v. Los Angeles City Water Co. 61 Cal. 65, 177 U. S. 558, 577, 578, 44 L. ed. 886. 895, 20 Sup. Ct. Rep. 736; St. Louis v. Western U. Teleg. Co. 63 Fed. 68; Los Angeles v. Southern P. R. Co. 67 Cal. 433, 7 Pac. 819; Sebastian v. Cov¬ ington d C. Bridge Co. 21 Ohio St. 451 ; Covington d C. Bridge Co. v. Mayer, 31 Ohio St. 317.
The closest analogy exists between the two governmental powers or functions of taxa¬ tion and regulation of rates and tolls. The reasoning and rules of construction and the principles of law and public policy which should be applied have been declared to be the same. In both cases nothing is to be presumed in limitation or restriction of leg¬ islative power, except what is expressed or implied.
Stanislaus County v. San Joaquin d K. River Canal d
Irrig. Co. 192 U. S. 201, 211, 48 L. ed. 406, 412, 24 Sup. Ct. Rep. 241; Covington d L. Tump. Road Co. v. Sand- ford, 164 U. S. 578, 587, 41 L. ed. 560, 563, 17 Sup. Ct. Rep. 198 ; Stone v. Farmers’ Loan d T. Co. 116 U. S. 307, 325, 29 L. ed. 636, 642, 6 Sup. Ct. Rep. 334, 388, 1191; 199 U. S.
Charles River Bridge v. Warren Bridge, 11 Pet. 420, 548, 9 L. ed. 773, 824.
But in both cases the elementary rule of legal reasoning, that what is implied is aa much a part of a contract or statute as what is actually expressed, has never been disre¬ garded.
Wilson County v. Third Nat. Bank, 103 U. S. 770, 778, 26 L. ed. 488, 491; Wood County v. Lackawana Iron d Coal Co. 93 U. S. 619, 624, 23 L. ed. 989, 991; First Nat. Bank v. Graham, 100 U. S. 699, 703, 25 L. ed. 750, 752; Pine Grove Twp. v. Talcott, 19 Wall. 666, 676, 22 L. ed. 227, 233; Western U. Teleg. Co. v. Eyser, 19 Wall. 419, 427, 22 L. ed. 43, 44; Davis v. Gray, 16 Wall. 203, 223, 21 L. ed. 447, 454; Lynde v. Winnebago County, 16 Wall. 6, 13, 21 L. ed. 272, 274; United States v. Hodson, 10 Wall. 395, 406, 19 L. ed. 937, 939 ; Butz v. Muscatine ( United States ex rel. Butz v. Muscatine) 8 Wall. 575, 581, 19 L. ed. 490, 493; Croxall v. Shererd (Doe ex dem. Croxall v. Sher- rerd) 5 Wall. 268, 283, 18 L. ed. 572, 578; United States v. Babbit, 1 Black, 55, 61, 17 L. ed. 94, 96; Rogers v. Kneeland, 10 Wend.
219.
Thus it is settled by the' adjudications of this court that a grant of power to a cor¬ poration to fix or collect tolls or rates does not of itself imply any exclusion of the power of the legislature thereafter to declare what shall be prima facie reasonable com¬ pensation for the services to be rendered; but it has never been intimated by this court that, where the charter of a corpora¬ tion, or the agreement between a corpora¬ tion and the state or a municipality, has ex¬ pressly provided for a fixed rate of toll or charge, such rate could be varied by the leg¬ islature or municipality without impairing the obligation of the contract.-
See Reagan v. Farmers’ Loan d T. Co. 154 U. S. 362, 393, 38 L. ed. 1014, 1022, 4 Inters. Com. Rep. 560, 14 Sup. Ct. Rep. 1047 ; Detroit v. Detroit Citizens’ Street R. Co. 184 U. S. 368, 46 L. ed. 592, 22 Sup. Ct. Rep. 410; Cleveland v. Cleveland City R. Co. 194 U. S. 517, 526, 48 L. ed. 1102, 1104, 24 Sup. Ct. Rep. 756; Cleveland v. Cleveland Electric R. Co. 194 U. S. 538, 48 L. ed. 1109, 24 Sup. Ct. Rep. 764; Chicago v. Sheldon, 9 Wall. 50, 19 L. ed. 594. To the same effect see Western Paving d Supply Co. v. Citi¬ zens’ Street R. Co. 128 Ind. 525, 10 L. R. A. 770, 25 Am. St. Rep. 402, 26 N. E. 188, 28 N. E. 88 ; State ex rel. Kansas v. Corrigan Consol. Street R. Co. 85 Mo. 263, 55 Am. Rep. 361 ; Billings v. Chicago, 167 Ill. 340, 47 N. E. 731; West Chicago Street R. Co. v. Chicago, 178 Ill. 344, 53 N. E. 112; Coast Line R. Co. v. Savannah, 30 Fed. 646; Pen¬ sacola v. Northrup, 14 C. C. A. 59, 30 U. S. App. 762, 66 Fed. 689.
ri
Supreme Court of
The legislature cannot in one breath in¬ sist that ’the terms of its grant shall be performed by the grantee according to the letter, and in another breath say that it may, under the reserved power, release itself from any reciprocal duty, and impose an ad¬ ditional tax while holding to the contract.
Stearns v. Minnesota , 179 U. S. 223, 45 L. ed. 162, 21 Sup. Ct. Rep. 73.
This court will determine for itself the scope and effect and true meaning of any contract the legislature has seen fit to make in consideration of the grant of' rights and privileges.
Douglas v. Kentucky, 168 U. S. 488, 500, 501, 42 L. ed. 553, 557, 18 Sup. Ct. Rep. 199; Jefferson Brwnch Bank v. /S 'kelly, 1 Black, 436, 443, 17 L. ed. 173, 177; Maine G. R. Go. v. Maine, 96 U. S. 499, 510, 511,
24 L. ed. 836, 840, 841; New Jersey v. Yard, 95 U. S. 104, 111, 113, 24 L. ed. 352, 353, 354; McCullough v. Virginia, 172 U. S. 102, 109, 43 L. ed. 382, 384, 19 Sup. Ct. Rep. 134; Shelby County v. Union d Planters’ Bank, 161 U. S. 149, 151, 40 L. ed. 650, 652, 16 Sup. Ct. Rep. 558; Houston d T. G. R. Co. v. Texas, 177 U. S. 66, 67, 44 L. ed. 673, 674,
20 Sup. Ct. Rep. 545.
The reserved power to alter, amend, or re¬ peal does not permit or sanction the destruc¬ tion of vested property rights.
People v. O’Brien, 111 N. Y. 1, 36, 2 L. R. A. 255, 7 Am. St. Rep. 684, 18 N. E. 692; Sinking Fund Cases, 99 U. S. 700,
25 L. ed. 496; Woodward v. Central Ver¬ mont R. Co. ISO Mass. 599, 62 N. E. 1051; Com. v. Essex Co. 13 Gray, 239; New York v. Twenty-third Street R. Co. 113 N. Y. 311,
21 N. E.‘60.
The present statute seeks to add to the obligations assumed in the various contracts, and at the same time expressly to preserve all the burdens of those contract's. As up¬ held by the court below, the act is nothing but an arbitrary exercise of power, and comes within the reasoning and the con¬ demnation of the case of Stearns v. Minne¬ sota, 179 U. S. 223, 45 L. ed. 162, 21 Sup. Ct. Rep. 73.
And see Duluth d I. R. R. Co. v. St. Louis County, 179 U. S. 302, 305, 45 L. ed. 201, 203, 21 Sup. Ct. Rep. 124; San Mateo County v. Southern P. R. Co. 7 Sawy. 517, 13 Fed. 145; Railroad Tax Case, 8 Sawy. 238, 13 Fed. 722; Santa Clara County v. Southern P. R. Co. 9 Sawy. 165,' 18 Fed. 385; San Mateo County v. Southern P. R. Co. 116 U. S. 138, 29 L. ed. 589, 6 Sup. Ct. Rep. 317 ; Santa Clara County v. Southern P. R. Co. 118 U. S. 394, 30 L. ed. 118, 6 Sup. Ct. Re]). 1132. See also, to the same effect, Russell v. Croy, 164 Mo. 69, 63 S. W. 849 ; State v. Mitchell, 97 Me. 66, 94 Am. St. Rep. 481, 53 Atl. 887; State v. Shedroi, 75 Vt. 72
the United States. Oct. Term,
277, 63 L. R. A. 179, 98 Am. St. Rep. 825, 54 Atl. 1081; State v. Hoyt, 71 Vt. 59, 42 Atl. 973; Dundee Mortg. Trust Invest. Co. v. School Dist. No. 1, 19 Fed. 359; Fraser v. McConway & T. Co. 82 Fed. 257; Railroad & Teleph. Cos. v. Board of Equalizers, 85 Fed. 302; Taylor v. Louisville & N. R. Co. 31 C. C. A. 537, 60 U. S. App. 166, 88 Fed. 350, 172 U. S. 647, 43 L. ed. 1182, 19 Sup. Ct. Rep. 887 ; Nashville, C. d St. L. R. Co. v. Taylor, 86 Fed. 168; Taylor v. Nashville, C. d- St. L. R. Co. 44 L. ed. 1219; Louisville Trust Co. v. Stone, 46 C. C. A. 299, 107 Fed.
305.
If it should be argued that it is proper to deduct the amount of these contract obli¬ gations from the tax laid upon the value of the contract rights, for reasons which would sustain deductions of mortgage indebtedness from assessments of real estate for taxation, the answer is obvious. The present deduc¬ tions are not made from the assessments ; on the contrary, under the scheme provided by the present statute, the franchise is to be assessed as real estate; that is to say, not subject to diminution for charges there¬ on (Heerwagen v. Crosstown Street R. Co. 179 N. Y. 99, 71 N. E. 729) ; and, further, under the laws of New York, such obliga¬ tions are deductible from the personal as¬ sessment (People ex rel. Cornell S. B. Co. v. Dederick, 161 N. Y. 195, 55 N. E. 927;
People ex rel. Manhattan R. Co. v. Barker, 165 N. Y. 305, 59 N. E. 151).
It would be a strange doctrine, if the mere manner or method in which legislation reaches a party could avoid the constitu¬ tional guaranty against the impairment of the obligation of contracts, which the Con¬ stitution intends shall not be impaired in any form or degree or manner, upon any pre¬ text whatever.
Broivn v. Maryland, 12 Wheat. 419, 444, 6 L. ed. 678, 6S7.
When the highest court of a state has ad¬ judicated upon the validity and legal scope and effect of a contract, particularly that of a municipality, and subsequent contracts are made od the faith of, and enormous sums are invested in reliance upon, such ju¬ dicial interpretation, every principle of fair¬ ness and justice requires that the contracts shall be construed and given legal effect according to the law as it was authorita¬ tively declared to be at the time the con¬ tracts were entered into.
Olcott v. Fond du Lac County, 16 Wall. 678, 690, 21 L. ed. 382, 386; Gelpcke v. Dubuque, 1 Wall. 175, 206, 17 L. ed. 520, 525; Taylor v. Ypsilanti, 105 U. S. 60, 71, 26 L. ed. 1008, 1012 ; Douglass v. Pike County, 101 U. S. 677, 686, 25 L. ed. 968, 971; New Buffalo Twp. v. Cambria Iron Co. 105 U. S. 73, 75, 26 L. ed. 1024, 1025; Stanly County
199 U. S.
190 New Yoiik ex rel. Metropolitan Street R. Co. v. State Bd. of Tax Comrs.
v. CoJer, 190 U. S. 437, 445, 47 L. ed. 1126, 1132, 23 Sup. Ct. Rep. 811; Burgess v. Selig- man, 107 U. S. 20, 33, 27 L. ed. 359, 365, 2 Sup. Ct. Rep. 10; Warburton v. White, 176 U. S. 484, 495, 44 L. ed. 555, 559, 20 Sup. Ct. Rep. 404 ; Los Angeles v. Los Ange¬ les City Water Co. 177 U. S. 558, 575, 44 L. ed. 886, 20 Sup. Ct. Rep. 736; Muhllcer v. New York & H. R. Co. 197 U. S. 544, 49 L. ed. 872, 25 Sup. Ct. Rep. 522; Lyon v. Rich¬ mond, 2 Johns. Ch. 51.
When we speak of obligations or cove¬ nants implied in fact, such as the obligation in the cases at bar not to increase the fixed or agreed franchise payments, we are not reading into the contract something that the parties did not contemplate and intend, nor are we adding to the understanding of the parties.
15 Am. & Eng. Enc. Law, 2d ed. 1078; Ogden v. Saunders, 12 Wheat. 213, 341, 342, 6 L. ed. 606, 650.
The exaction of a percentage of the gross receipts was a tax, and nothing else ; that is, an imposition or exaction for the supply of the public treasury, — “a charge, a pecun¬ iary burden, for the support of government.”
United Slates v. Baltimore c£- O. R. Co. 17 Wall. 322, 326, 21 L. ed. 597, 599.
The mere fact that the words “compensa¬ tion” and “rental” were used by the legis¬ lature in any of the acts in question does not in any way tend to change the nature of the payment.
People ex rel. Manhattan F. Ins. Co. v. Tax & A. Comrs. 76 N. Y. 64; 2 Tiedeman, State & Federal Control of Persons and Property, p. 619.
Under the reserved power to amend, alter, or repeal a charter, the legislature cannot nullify or impair the obligation of a con¬ tract between a corporation and a munici¬ pality or other third person.
People v. O’Brien, 111 N. Y. 1, 2 L. R. A. 255, 7 Am. St. Rep. 684, 18 N. E. 692; Lake Shore & M. S. R. Co. v. Smith, 173 U. S. 684, 690, 43 L. ed. 858, 861, 19 Sup. Ct. Rep. 565.
The legislature could not impose any new obligation on the owners of franchises grant¬ ed by the city, without impairing the obli¬ gations of the several contracts.
Planters’ Bank v. Sharp, 6 How. 301, 327, 12 L. ed. 447, 458.
It is difficult to perceive any reason why grants of franchises by the state should be governed by any different rules than grants by a municipality, for in each case every ele¬ ment of contract fully exists.
City R. Co. v. Citizens’ Street R. Co. 166 U. S. 557, 567, 41 L. ed. 1114, 17 Sup. Ct. Rep. 653.
The reasons which protect the grantee in
199 TJ. S.
the one case equally apply to the grantee in the other. The character of the obligation assumed and of the consideration to be paid is the same. The idea that the grants of a state are revocable has long since been ex¬ ploded.
Fletcher v. Peck, 6 Cranch, 87, 3 L. ed. 162; Langdon v. New York, 93 N. Y. 129.
It is further argued by defendant that, if there be the slightest doubt as to an ex¬ emption from taxation, or as to the validity of a contract for a fixed amount of tax, the case is at once to be resolved against the grantees of these franchises. The old idea seems again presented that, because the state court has overruled the contention of the plaintiffs in error as to the legal effect of the contract, this court must surrender its judgment, abide by the view of the state court, and decide against the grantee. That no such abdication of judicial duty is per¬ missible has been often recognized.
Citizens’ Bank v. Parker, 192 U. S. 73, 85, 48 L. ed. 346, 356, 24 Sup. Ct. Rep. 181; Freeport Water Co. v. Freeport, 180 U. S. 587. 610, 45 L. ed. 679, 693, 21 Sup. Ct. Rep. 493.
There is also to be found in defendant’s argument the familiar plea as to the neces¬ sity of preserving the taxing power, etc., etc., as if there were any danger to the taxing power in the cases at bar, where the plaintiffs in error and those similarly situ¬ ated are now paying hundreds of thousands of dollars annually in taxes, not only on their franchises, but on everything else.
Murray v. Charleston, 96 U. S. 432, 444, 448, 449, 24 L. ed. 760, 762, 764.
Whatever propriety and justice there may have been in drawing under the general tax laws of the state the numerous franchises which had been granted for no consideration, and the owners of which had never contrib¬ uted to the taxes of the state, it was funda¬ mentally unfair and unjust to disregard the contract rights of those who had for years been paying enormous taxes on their fran¬ chises, and, while preserving to the letter .the burden assumed, refuse to recognize any reciprocal obligation to abide by contracts entered into upon the plighted faith of the city and state.
Steams v. Minnesota, 179 U. S. 223, 261, 45 L. ed. 162, 180, 21 Sup. Ct. Rep. 73; Duluth & I. R. R. Go. v. St. Louis County, 179 U. S. 302, 305, 45 L. ed. 201, 203, 21 Sup. Ct. Rep. 124.
Mr. Ellliu Root also argued the cause for plaintiff in error. For his contentions see his brief as reported in New York ex reli Twenty-third Street R. Co. v. State Bd. of Tax Comrs. post, 85.
73
85, 36
Supreme Court of The United States.
Got. Term,
Messrs. Julius M. Mayer and Louis Marshall argued the cause and filed a brief for defendant in error:
Nothing was more remote from the inten¬ tion of the legislature and of the municipal¬ ity than to confer immunity from taxation on the grantees of the several franchises up¬ on which the relator has been assessed with respect to the property and property rights granted.
The payments which were required of the grantees were not in the nature of taxation in any sense of the word. They were com¬ pensation for the rights conferred, and noth¬ ing more. In some of the statutes the pay¬ ment is referred to as in the nature of a payment of a rental ; in others as “compen¬ sation;” and while the acts appearing as appendices, under which a large number of the franchises are derived, do not denomi¬ nate the annual payments required to be made, it is evident that the payment is re¬ quired as a consideration for the franchise acquired through the action of the local authorities, or purchased at public auction by the successful bidder.
Re New York, 11 Johns. 80; Roosevelt Hospital v. New York, 84 N. Y. 112; Citi¬ zens’ Sav. <£- L. Asso. v. Topeka, 20 Wall. 664, 22 L. ed. 461 ; Lane County v. Oregon, 7 Wall. 80, 19 L. ed. 105; St. Louis v. West¬ ern U. Telcg. Co. 148 U. S. 92, 37 L. ed. 380, 13 Sup. Ct. Rep. 485.
It is clear that the legislature did not in¬ tend to deal with the subject of taxation, or of exemption from taxation. At all events it cannot be said that an intention to deal with those subjects existed beyond ques¬ tion, and unless the ease is thus clear, there can be no implication of a contract.
Providence Bank v. Billings, 4 Pet. 514, 7 L. ed. 939 ; Farrington v. Tennessee, 95 U. S. 686, 24 L. ed. 560; Vicksburg R. Co. v. Dennis, 116 U. S. 668, 29 L. ed. 771, 6 Sup. Ct. Rep. 625; Stone v. Farmers Loan d T. Co. 116 U. S. 328, 29 L. ed. 643, 6 Sup. Ct. Rep. 334, 388, 1191; Wells v. Savannah, 181 U. S. 539, 45 L. ed. 991, 21 Sup. Ct. Rep. 697 ; Skaneateles Water Works Co. v. Skaneateles, 184 U. S. 363, 46 L. ed. 590, 22 Sup. Ct. Rep. 400; Knoxville Water Co. v. Knoxville, 189 U. S. 436, 47 L. ed. 890, 23 Sup. Ct. Rep. 531.
The amount of tax which the relators are required to pay on their special franchises is reduced by the amount of payments made by them in the nature of a tax. It does not, therefore, lie with them to attack for ine¬ quality a statute under which they derive a benefit.
Tyler v. Registration Judges, 179 U. S. 405, 45 L. ed. 252, 21 Sup. Ct. Rep. 206; Greenwood v. Union Freight R. Co. 105 U. S. 23, 26 L. ed. 965.
74
The statute creates no inequality. On the contrary, it seeks to place the owners of special franchises on an equal footing. Those who have made no payments in the nature of a tax are required to pay a tax based on the full amount of their assessment. Those who have made such payments receive credit therefor. In other words, there is an equitable classification of the persons or cor¬ porations who are subjected to the special franchise tax, similar to that which was recognized as valid in Magoun v. Illinois Trust & Sav. Bank, 170 U. S. 283, 42 L. ed. 1037, 18 Sup. Ct. Rep. 594; Orr v. Gilman,
1S3 U. S. 278, 46 L. ed. 196, 22 Sup. Ct.
Rep. 213.
In Bell’s Gap R. Co. v. Pennsylvania, 134 U. S. 232, 33 L. ed. 892, 10 Sup. Ct. Rep.
533, Mr. Justice Bradley recognized the right to allow deductions for indebtedness, as within the range of the state’s power to regulate taxation.
Mr. Justice Brewer delivered the opin¬ ion of the court:
The decision of the court of appeals set¬ tles that there is nothing in the law or the proceedings in this case in conflict with the Constitution of that state. It is not con¬ tended by the plaintiff in error that there is any constitutional objection to the taxa¬ tion of franchises. The right to subject them to a share in the burden of supporting the government is conceded.
The main contention is that this tax leg¬ islation impairs the obligation of contracts.
It must be borne in mind that presumptive¬ ly all property within the territorial limits of a state is subject to its taxing power. Whoever insists that any particular prop¬ erty is not so subject has the burden of proof, and must make it entirely clear that, by contract or otherwise, the *property is [36} beyond its reach. In Providence Bank v. Billings, 4 Ret. 514, 7 L. ed. 939, Mr. Chief Justice Marshall, in delivering the opinion of the court, said (p. 561, L. ed. p. 955) :
“That the taxing power is of vital im¬ portance, that it is essential to the exist¬ ence of government, are truths which it cannot be necessary to reaffirm. They are acknowledged and asserted by all. It would seem that the relinquishment of such a power is never to be assumed. We will not say that a state may not relinquish it, that a consideration sufficiently valuable to in¬ duce a partial release of it may not exist; but, as the whole community is interested in retaining it undiminished, that commu¬ nity has a right to insist that its abandon¬ ment ought not to be presumed in a case in which the deliberate purpose of the state to abandon it does not appear.”
In Vicksburg, 8. d P. R. Co. y. Dennis,
199 U. S.
1 90 4 . New York ex rel. Metropolitan Street R. Co. v. State Bd. of Tax Comrs. 36-38
116 U. S. 665, 29 L. ed. 770, 6 Sup. Ct. Rep. 625, Mr. Justice Gray cited many authori¬ ties, quoting the different phraseology in which, by the several writers of the opin¬ ions, the same rule was announced. In Wells v. Savannah, 181 U. S. 531, 45 L. ed. 986, 21 Sup. Ct. Rep. 697, the law was thus stated by Mr. Justice Peckham (p. 539, L. ed. p. 991, Sup. Ct. Rep. p. 700) :
“The payment of taxes on account of property otherwise liable to taxation can only be avoided by clear proof of a valid contract of exemption from such payment; and the validity of such contract presup¬ poses a good consideration therefor. If the property be, in its nature, taxable, the con¬ tract exempting it from taxation must, as we have said, be clearly proved. It will not be inferred from facts which do not lead irresistibly and necessarily to the existence of the contract. The facts proved must show either a contract expressed in terms, or else it must be implied from facts which leave no room for doubt that such was the intention of the parties, and that a valid consideration existed for the contract. If there be any doubt on these matters, the contract has not been proven, and the ex¬ emption does not exist.”
In Chicago Theological Seminary v. Illi¬ nois, 188 U. S. 662, 47 L. ed. 641, 23 Sup. Ct. Rep. 386, the same Justice declared (p. 672, L. ed. p. 648, Sup. Ct. Rep. p. 387) :
“The rule is that, in claims for exeinp-