State Bank of Ohio v. Knoop. 16 H.

to those general principles I have already considered. In this act, of seventy-five sections, which organizes a vast [*415] machinery for private banking, which directs the delicate

and complex arrangements for. the supply of a paper currency to the State, and determines the investment of millions of capital, we find this sixtieth section. The act is enabling and permissive. It makes it lawful for persons to combine and to conduct business in a particular manner. It forms no partnership for the State, compels no one to embrace or to continue the application of industry and capital according to its scheme. It grants licenses under certain conditions and reservations, but is nowhere coercive. Among the general regulations is the one which directs the banks, at the end of every six months, to ascertain their net profits for the six months next preceding, and to set apart six per cent. for the State in the place of the other taxes or contributions to which they would be liable. But the legislature imposes no limit to its power, nor term to the exercise of its will, nor binds itself to adhere to this or any other rule of taxation. The subject affects the public order and general administration. It is not properly a matter for bargain or barter; but the enactment is in the exercise of a sovereign power, comprehending within its scope every individual interest in the State. It is a power which every department of government knows that the community is interested in retaining unimpaired, and that every corporator understood its abandonment ought not to be presumed in a case in which the deliberate purpose to abandon it does not appear.

I have sought in vain in the sixtieth section of the act, in the act itself, and in the legislation and jurisprudence of Ohio, for the expression of such a deliberate purpose.

My opinion is, that the supreme court of Ohio has faithfully applied the lessons inculcated by this court, and that its judgment should be affirmed.

Order. This cause came on to be heard on the transcript of the record from the supreme court of Ohio, and was argued by counsel. On consideration whereof it is now here ordered and adjudged by this court that the judgment of the said supreme court of Ohio in this cause be and the same is hereby reversed, with costs, and that this cause be and the same is hereby remanded to the said supreme court of Ohio for further proceedings, to be had therein in conformity to the opinion of this court.

16 H. 416; 18 H. 331, 380, 384; 19 H. 202, 393; 1 B. 436, 474; 2 B. 544; 1 Wal. 384; 4 Wal. 535.

Ohio Life Insurance and Trust Company v. Debolt. 16 H.

THE OHIO LIFE INSURANCE AND TRUST COMPANY, Plaintiffs in Error, v. HENRY DEBOLT, Treasurer of Hamilton County, Defendant in Error.

16 H. 416.

The principles involved in the preceding decision further explained and applied to this case; but the legislation of Ohio, respecting the taxation of the plaintiffs, held not to amount to a contract, the obligation of which had been impaired.

Rules of construction of public grants, especially those made to corporations, in derogation of common right.

ERROR to the supreme court of Ohio. The case is stated in the opinion of the court.

Worthington and Stanberry, for the plaintiffs.

Spalding and Pugh, contrà.

[* 427 ]

*TANEY, C. J. In this case, the judgment of the supreme court of the State of Ohio is affirmed. But the majority of the court who give this judgment, do not altogether agree in the principles upon which it ought to be maintained. I proceed, therefore, to state my own opinion, in which I am authorized to say my brother Grier entirely concurs.

In 1851, the legislature of Ohio passed an act "to tax banks and bank and other stocks, the same as other property." The act makes it the duty of the president and cashier of every banking institution, having the right to issue bills or notes for circulation, annually to list and return to the assessor in the township or ward where the bank is located, the amount of capital and stock at its true value in money, together with the amount of surplus and contingent fund belonging to such institution, upon which the same amount of tax is to be levied and paid as upon the property of individuals. And by the third section of this act, the Ohio Life Insurance and Trust Company (the plaintiff in error) was brought within its provisions, and subjected to the payment of a like tax in all the several counties where its capital stock was loaned, according to the amount loaned and the average rate of taxation in each.

The payment of this tax was resisted by the plaintiff in error, upon the ground that the law imposing it impaired the obligation of certain contracts previously made between the State and the corporation.

On the other hand, it was insisted, on behalf of the State, that the right of taxation cannot be so aliened by mere statute as to prevent its resumption by the legislature whenever the public necessities re quire; and that the legislature was the judge of the public necessity in such cases.

Ohio Life Insurance and Trust Company v. Debolt. 16 H.

And, further, if it should be held that the legislature of Ohio had the power to aliene its right of taxation, yet it had not exercised it in this instance; and when the tax in question was levied, there was no previous contract between the State and the corporation by which the State had relinquished the right to impose it.

The company having refused to pay the tax, upon the ground above stated, the defendant in error, who is the [* 428 ] treasurer of Hamilton county, in which the corporation is located, instituted proceedings to enforce its collection. And upon final hearing of the parties, the supreme court of Ohio decided in favor of the State, and directed the tax to be paid, together with the penalty which the law inflicted for its detention. It is to revise this decree of the state court that the present writ of error is brought.

This brief statement will show that the questions which arise on this record, are very grave ones. They are the more important, because, from the multitude of corporations chartered in the different States, and the privileges and exemptions granted to them, questions of a like character are continually arising, and ultimately brought here for final decision. These controversies between a State and its own corporations necessarily embarrass the legislation of the State, and are injurious to the individuals who have an interest in the company. And as the principles upon which this case is decided, will, for the most part, equally apply to all of them, it is proper that they should be clearly and distinctly stated. I proceed to express my own opinion on the subject.

It will be admitted on all hands that, with the exception of the powers surrendered by the constitution of the United States, the people of the several States are absolutely and unconditionally sovereign within their respective territories. It follows that they may impose what taxes they think proper upon persons or things within their dominion, and may apportion them according to their discretion and judgment. They may, if they deem it advisable to do so, exempt certain descriptions of property from taxation, and lay the burden of supporting the government elsewhere. And they may do this in the ordinary forms of legislation or by contract, as may seem best to the people of the State. There is nothing in the constitution of the United States to forbid it, nor any authority given to this court to question the right of a State to bind itself by such contracts, whenever it may think proper to make them.

There are undoubtedly fixed and immutable principles of justice, sound policy, and public duty, which no State can disregard without serious injury to the community, and to the individual citizens who compose it. And contracts are sometimes incautiously made by

Ohio Life Insurance and Trust Company v. Debolt. 16 H.

*

States, as well as individuals; and franchises, immunities, and exemptions from public burdens improvidently granted. But whether such contracts should be made or not, is exclusively for the consideration of the State. It is the exercise of an undoubted power of sovereignty which has not been surrendered by the adoption [* 429] of the constitution of the United States, and over which this court has no control. For it can never be maintained in any tribunal in this country, that the people of a State, in the exercise of the powers of sovereignty, can be restrained within narrower limits than those fixed by the constitution of the United States, upon the ground that they may make contracts ruinous or injurious to themselves. The principle that they are the best judges of what is for their own interest, is the foundation of our political institutions.

It is equally clear, upon the same principle, that the people of a State may, by the form of government they adopt, confer on their public servants and representatives all the powers and rights of sovereignty which they themselves possess; or may restrict them within such limits as may be deemed best and safest for the public interest. They may confer on them the power to charter banks or other companies, and to exempt the property vested in them from taxation by the State for a limited time during the continuance of their charters, or accept a specified amount less than its fair share of the public burdens. This power may be indiscreetly and injudiciously exercised. Banks and other companies may be exempted, by contract, from their equal share of the taxes, under the belief that the corporation will prove to be a public benefit. Experience may prove that it is a public injury. Yet, if the contract was within the scope of the authority conferred by the constitution of the State, it is like any other contract made by competent authority, binding upon the parties. Nor can the people or their representatives, by any act of theirs afterwards, impair its obligation. When the contract is made, the constitution of the United States acts upon it, and declares that it shall not be impaired, and makes it the duty of this court to carry it into execution. That duty must be performed.

This doctrine was recognized in the case of Billings v. The Providence Bank, 4 Pet. 514, and again in the case of The Charles River Bridge Company, 11 Pet. 420. In both of these cases the court, in the clearest terms, recognized the power of a state legislature to bind the State by contract; and the cases were decided against the corporations, because, according to the rule of construction in such cases, the privilege or exemption claimed had not been granted. But the power to make the contract was not questioned. And I am not

Ohio Life Insurance and Trust Company v. Debolt. 16 H.

aware of any decision in this court calling into question any of the principles maintained in either of these two leading cases. On the contrary, they have since, in the case of Gordon v. Appeal Tax Court, 3 How. 133, been directly reaffirmed.

The question in that case was precisely the same with the present one; that is to say-whether the State had relinquished *its right of taxation to a certain extent, in its charter to a [* 430 ] bank? The court held that it had, and reversed the judgment of the state court, which had decided to the contrary. And this opinion appears to have been unanimous-for no dissent is entered.

Again, in the case of The Richmond Railroad Company v. The Louisa Railroad Company, 13 How. 71, the question was, whether the State had not, by its charter to the former, contracted not to authorize a road like the latter, which would tend to diminish the number of passengers travelling upon the former between Richmond and Washington. The case, therefore, in principle was the same with that of The Charles River Bridge v. The Warren Bridge; and it was decided on the same ground: that is, that the contract, according to the rule of construction laid down in the Charles River Bridge case, did not extend to such a road as was authorized by the charter to the Louisa Railroad Company. But the opinion of the majority of the court is founded expressly upon the assumption that the legislature might bind the State by such a contract; and the three judges who dissented were of opinion not only that the legislature might bind it, but that it had bound it; and that the charter to the Louisa Railroad Company violated the contract and impaired its obligation. They adopted a rule of construction more favorable to the corporation than the one sanctioned in The Charles River Bridge v. The Warren Bridge.

It seemed proper on this occasion to remark more particularly upon this case, and the case of Gordon v. The Appeal Tax Court, because the last mentioned case was a restriction upon the taxing power of the State; and the other a restriction upon its power to authorize useful internal improvements-the two together illustrating and confirming the principles upon which The Providence Bank v. Billings, and The Charles River Bridge case, were decided.

There are other cases upon the same subject, but it is not necessary to extend this opinion by referring to them. It is sufficient to say, that they will all be found to maintain the same principles with the cases above mentioned, and that there is no one case in which this court has sanctioned a contrary doctrine.

I have dwelt upon this point more at length, because, while I con