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pared by those interested in them, and submitted to the legislatures with a view to obtain from such bodies the most liberal grant of privileges which they are willing to give. This is one among many reasons why they are to be strictly construed," Cleveland Electric Ry. v. Cleveland (1907), 204 U. S. 116, 129. Franchises purporting to be exclusive are scrutinized by the courts with particular care, but when the intent to confer such a franchise is clear it will be enforced according to its terms, The Binghampton Bridge (1865), 3 Wallace, 51; New Orleans Water Co. v. Rivers (1885), 115 U. S. 674; Vicksburg v. Vicksburg Water Co. (1906), 202 U. S. 453.

The power to tax is so essential to the existence of the State that "the fact of its surrender in favor of a corporation or an individual must be shown in language which cannot be otherwise reasonably construed and all doubts as to the intent to make such a contract are to be resolved in favor of the State," Seton Hall College v. South Orange (1916), 242 U. S. 100. While a legislative enactment granting exemption from taxation may constitute a contract, Piqua Bank v. Knoop (1853), 16 Howard, 369; Washington University v. Rouse (1869), 8 Wallace, 430; Stearns v. Minnesota (1900), 179 U. S. 223; Wright v. Central of Georgia Ry. (1914), 236 U. S. 674; Central of Georgia Ry. v. Wright (1919), 248 U. S. 525, the courts do not look with favor upon claims to such exemption, Tucker v. Ferguson (1875), 22 Wallace, 527; Morgan v. Louisiana (1876), 93 U. S. 217; and all doubts as to whether such a contract exists will be resolved in favor of the State, Chicago Railway Co. v. Guffey (1887), 120 U. S. 569. An exemption from taxation may be a spontaneous concession belonging to the class of privilegia favorabilia, Christ Church v. County of Philadelphia (1861), 24 Howard, 300. In that case it is subject to repeal.

The power of eminent domain, like the power of taxation, is an essential power of government with which the State cannot part. All the contracts of the State are made in subordination to it. In West River Bridge Co. v. Dix (1848), 6 Howard, 507, the court said: Into all contracts, whether made between States and individuals or between individuals only, there enter conditions which arise not out of the literal terms of the contract itself; they are superinduced by the preëxisting and higher authority of the laws of nature, of nations, or of the community to which the parties belong; they are always presumed, and must be presumed, to be known and recognized by all, are binding upon all, and need never, therefore, be carried into express stipulation, for this could add nothing to their force. Every contract is made in subordination to them, and must yield to their control, as conditions inherent and paramount, wherever a necessity for their execution shall occur. Such a condition is the right of eminent domain. This right does not operate to impair the contract affected by it, but recognizes its obligation in the fullest extent, claiming only the fulfillment of an essential and inseparable condition.

A contract by the State to refrain from opening streets through

the grounds of a hospital without the hospital's consent is subject to the right of eminent domain, Pennsylvania Hospital v. Philadelphia (1917), 245 U. S. 20. A city which has made a contract with a water company for a term of years may condemn all the company's property, including its franchise. In so doing it violates no contract but appropriates it upon payment of compensation to a public use, Long Island Water Supply Co. v. Brooklyn (1897), 166 U. S. 685. See also West River Bridge Co. v. Dix (1848), 6 Howard, 507; Hall v. Wisconsin (1880), 103 U. S. 5 and Cincinnati v. Louisville & Nashville Ry. (1912), 223 U. S. 390.

In Manigault v. Springs (1905), 190 U. S. 473, Mr. Justice Brewer said that the police power "is an exercise of the sovereign right of the government to protect the lives, health, morals, comfort and general welfare of the people, and is paramount to any rights under contracts between individuals." The legislature cannot by any contract divest itself of the power to provide for these objects, Beer Company v. Massachusetts (1878), 97 U. S. 25. This is especially true where the public health and the public morals are involved. Butchers' Union Slaughter House Co. v. Crescent City Slaughter House Co. (1883), 111 U. S. 746. An exclusive franchise to supply gas to New Orleans by means of pipes in its streets for a period of fifty years is not prejudicial to the public health or safety and is an irrepealable contract, New Orleans Gas Co. v. Louisiana Light Co. (1885), 115 U. S. 650. A franchise to a street railway company to lay tracks in the streets of a city for an indefinite term may be regulated but not destroyed, Grand Trunk Western Ry. v. South Bend (1913), 227 U. S. 544. The State may regulate the rates of public utilities even though such regulation affects private contracts with consumers, Knoxville Water Co. v. Knoxville (1903), 189 U. S. 434. It may by contract divest itself for a considerable period of the power to make or regulate rates, Home Telephone Co. v. Los Angeles (1908), 211 U. S. 265. Such a contract may extend beyond the corporate life of the grantee, and in that case it becomes part of its divisible assets, Minneapolis v. Minneapolis Street Ry. (1910), 215 U. S. 417. But in every case in which a contract limiting the power of the State to fix rates is alleged, there is a strong presumption that the State has not surrendered its power. Hence a grant to a company of "power to collect and receive such tolls or freight for transportation of persons or property thereon as it may prescribe" was construed to authorize merely the imposition of reasonable rates, leaving it to the State to determine whether the rates prescribed were reasonable, Railroad Commission Cases (1886), 116 U. S. 307. See also Owensboro v. Owensboro Water Works Co. (1903), 191 U. S. 358. And likewise authorization to a city to fix rates is not authorization to make a contract as to rates which is binding on the State, Freeport Water Co. v. Freeport (1901), 180 U. S. 587; but delegation of power to make such a contract is not impossible, Los Angeles v. City Water Co. (1900), 177 U. S. 558; Vicksburg v. Vicksburg Waterworks Co. (1907), 206 U. S. 496: Detroit United Ry. v. Michigan (1916), 242

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While immunity from the exercise of governmental power may be

protected by the contract clause while in the hands of the original grantee, such a grant, unless expressly so stipulated, is not property which the owner may transfer to another but is personal to him and incapable of assignment, Picard v. East Tennessee, Va. & Ga. Ry. (1889), 130 U. S. 637; Rochester Railway Co. v. Rochester (1907), 205 U. S. 236; Morris Canal & Banking Co. v. Baird (1915), 239 U. S. 126. The transfer of such exemption may be authorized by the State, but in such case the exemption derives its validity from such authorization and not from the original grant. In case of doubt as to whether the right to immunity from governmental action has been made transferable, every presumption is against it. Hence, leasehold interests in tax-exempt lands are subject to taxation, Jetton v. University of the South (1908), 208 U. S. 489; and a legislative authori zation of the transfer of "the property and franchises," Morgan v. Louisiana (1876), 93 U. S. 217, or of "the property," Wilson v. Gaines (1881), 103 U. S. 417, or of "the charter and works," Memphis &c. Ry. v. Commissioners (1884), 112 U. S. 609; or of "the rights of franchise and property," Norfolk & Western Ry. v. Pendleton (1895), 156 U. S. 667, or of "the estate, property, rights, privileges and franchises," Rochester Railway Co. v. Rochester (1907), 205 U. S. 236, was not sufficient to convey to the grantee the immunity from the exercise of governmental power which had been enjoyed by the grantor; but compare Choate v. Trapp (1912), 224 U. S. 665, where tax exemptions in favor of Indians were liberally construed.

On contracts affecting governmental powers see Colby, Exemption from Taxation by Legislative Contract, American Law Review, XIII, 26; Fenwick, Charter Contracts and the Regulation of Rates, Michigan Law Review, IX, 225; Goodnow, The Nature of Tax Exemption, Columbia Law Review, XIII, 104; Huffcutt, Legislative Tax Exemption Contracts, American Law Review, XXIV, 399; Cooley, Constitutional Limitations.

SECTION 3. WHAT IS AN IMPAIRMENT OF THE OBLIGATION OF A CONTRACT.

STURGES v. CROWNINSHIELD.

SUPREME COURT OF THE UNITED STATES. 1819.
4 Wheaton, 122.

Certificate from the Circuit Court of the United States for the District of Massachusetts.

This was an action of assumpsit brought in the Circuit Court of Massachusetts, against the defendant, as the maker of two promissory notes, both dated at New York, on the 22d of March 1811, for the sum of $771.86 each, and payable to the plaintiff,

one on the 1st of August, and the other on the 15th of August 1811. The defendant pleaded his discharge under "an act for the benefit of insolvent debtors and their creditors," passed by the legislature of New York, the 3d day of April 1811. After stating the provisions of the said act, the defendant's plea averred his compliance with them, and that he was' discharged, and a certificate given to him, the 15th day of February 1812. To this plea, there was a general demurrer and joinder. At the October term of the circuit court, 1817, the cause came on to be argued and heard on the said demurrer, and the following questions arose, to wit: .

3. Whether the act aforesaid is an act or law impairing the obligation of contracts, within the meaning of the constitution of the United States?

The judges of the circuit court were opposed in opinion thereupon; and upon motion of the plaintiff's counsel, the questions were certified to the supreme court, for their final decision.

MARSHALL, CH. J., delivered the opinion of the court.

We proceed to the great question on which the cause must depend. Does the law of New York, which is pleaded in this case, impair the obligation of contracts, within the meaning of the constitution of the United States? This act liberates the person of the debtor, and discharges him from all liability for any debt previously contracted, on his surrendering his property in the manner it prescribes.

In discussing the question, whether a state is prohibited from passing such a law as this, our first inquiry is into the meaning of words in common use-what is the obligation of a contract? and what will impair it? It would seem difficult to substitute words which are more intelligible, or less liable to misconstruction, than those which are to be explained. A contract is an agreement, in which a party undertakes to do, or not to do, a particular thing. The law binds him to perform his undertaking, and this is, of course, the obligation of his contract. In the case at bar, the defendant has given his promissory note to pay the plaintiff a sum of money on or before a certain day. The contract binds him to pay that money on that day; and this is its obligation. Any law which releases a part of this obligation, must, in the literal sense of the word, impair it. Much more

must a law impair it, which makes it totally invalid, and entirely discharges it.

The words of the constitution, then, are express, and incapable

of being misunderstood. They admit of no variety of construction, and are acknowledged to apply to that species of contract, an engagement between man and man for the payment of money, which has been entered into by these parties. Yet, the opinion, that this law is not within the prohibition of the constitution has been entertained by those who are entitled to great respect, and has been supported by arguments which deserve to be seriously considered. It has been contended, that as a contract can only bind a man to pay to the full extent of his property, it is an implied condition that he may be discharged on surrendering the whole of it. But it is not true, that the parties have in view only the property in possession when the contract is formed, or that its obligation does not extend to future acquisitions. Industry, talents and integrity constitute a fund which is as confidently trusted as property itself. Future acquisitions are, therefore, liable for contracts; and to release them from this liability impairs their obligation.

It has been argued, that the states are not prohibited from passing bankrupt laws, and that the essential principle of such laws is to discharge the bankrupt from all past obligations; that the states have been in the constant practice of passing insolvent laws, such as that of New York, and if the framers of the constitution had intended to deprive them of this power, insolvent laws would have been mentioned in the prohibition; that the prevailing evil of the times, which produced this clause in the constitution, was the practice of emitting paper money, of making property which was useless to the creditor a discharge of his debt, and of changing the time of payment, by authorizing distant installments. Laws of this description, not insolvent laws, constituted, it is said, the mischief to be remedied; and laws of this description, not insolvent laws, are within the true spirit of the prohibition.

The constitution does not grant to the states the power of passing bankrupt laws, or any other power; but finds them in possession of it, and may either prohibit its future exercise entirely, or restrain it so far as national policy may require. It has so far restrained it, as to prohibit the passage of any law impairing the obligation of contracts. Although, then, the states may, until that power shall be exercised by congress, pass laws concerning bankrupts; yet they cannot constitutionally introduce into such laws a clause which discharges the obligations the bankrupt has entered into. It is not admitted, that, with

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