contention was that the latter act of incorporation impaired the obligation of the contract contained in the former. It will be noticed that the general franchises of the first road were in no way interfered with; all that could be affected was the right growing out of the collateral stipulation. Had the Supreme Court decided this stipulation to be no contract, and therefore not binding on the state, there would have been an end of the case. But the court assumed the stipulation to be a valid contract, and therefore binding upon the state, and, from a construction of the language of the acts, simply held that the second charter did not impair the obligation of the first; because it did not appear that the company formed under this second charter would interfere with the passenger traffic of the first road. This conclusion seems to be entirely correct; yet from it three able judges, McLean, Wayne, and Curtis dissented, holding both that the stipulation was a contract, and that the subsequent act of incorporation impaired its obligation.

1

§ 574. I now pass to some decisions of state courts involving this question. In The Piscataqua Bridge v. The New Hampshire Bridge (1834), the subject came before the Supreme Court of New Hampshire. The plaintiffs had been chartered as a bridge company; and the exclusive right had been given them to erect and maintain a toll-bridge within certain limits, which bridge they had erected. The legislature subsequently incorporated the defendants, and authorized them to build a bridge over the same stream and within the prescribed limits. This latter statute made no provision for any compensation to be paid to the plaintiffs. The defendants were proceeding to erect their bridge. The plaintiffs thereupon commenced the suit to restrain this erection. In delivering the opinion of the court, Mr. Justice Parker held the following propositions : That the exclusive grant to the plaintiffs was a contract as much as the mere grant of the franchise to erect and maintain the bridge; that the legislature could not impair the obligation of this contract; that the bridge of the defendants, erected by them without paying any compensation to the plaintiffs, would be an impairing the obligation of the contract; and that, there17 New Hamp. R. 35.

fore, the erection must be restrained. In the course of his opinion the judge discussed some questions not involved in the case, but which have a general interest. He held that the legislature, under its right of eminent domain, would have had the power to authorize the second bridge upon providing for compensation to be ascertained and given to the plaintiffs for the injury to their rights, in the same manner that all or any private property may be taken for public uses upon the payment of compensation; also, that the plaintiffs' charter could not be construed as restraining the legislature from exercising its right of eminent domain upon making compensation; and he added, that, if the charter had contained such a stipulation, the restriction would be a nullity, for he was of opinion that a state could not thus bargain away its sovereign prerogatives.

§ 575. In Brewster v. Hough' (1839), the same question again came before the same court; and here also the opinion expressed was confessedly unnecessary to the decision. The case involved the subject of taxation. Mr. Chief Justice Parker said: "The power of taxation is essentially a power of sovereignty, or eminent domain; and it may well deserve consideration whether this power is not inherent in the people under a republican form of government, and so far inalienable that no legislature can make a contract by which it shall be surrendered, without express authority for that purpose in the Constitution." He adds: "Let it be distinctly understood that we do not intend to suggest a doubt of the right of a legislature in divers instances to make contracts which shall bind future legislatures." He then refers to the previous decision in relation to the toll-bridge, and proceeds: "But to hold that the legislature cannot make a grant whereby the property shall be exempted from public use, and to hold also that they cannot contract to exonerate the property of citizens from taxation, and thereby bind future legislatures, by no means indicates an opinion that the legislature have the right to rescind or abrogate grants of land and franchises, or contracts lawfully entered into by a preceding legislature. There is a material difference between the right of a legisla

1 10 New Hamp. R. 138.

ture to grant lands, or corporate powers, or money, and the right to grant away essential attributes of sovereignty, or rights of eminent domain. These do not seem to furnish the subjectmatter of a contract."

§ 576. Again in Backus v. Lebanon 1 (1840), the same court approved of the doctrine stated in the foregoing passages, although in this instance also such an expression of opinion was unnecessary. It is evident, therefore, that in New Hampshire, although the question has not been directly presented for decision, the Supreme Court has repeatedly assumed and advocated the principle that collateral stipulations in charters which limit the legislative power of the state over taxation and the right of eminent domain, are not con

tracts.

§ 577. The Supreme Court of Massachusetts examined this subject at great length and with much ability, in Boston and Lowell Railroad Company v. Salem and Lowell Railroad Company 2 (1854). The plaintiffs had been incorporated in 1830 to construct and maintain a railway from Boston to Lowell. The charter contained the following clause: "No other railroad than the one hereby granted shall, within thirty years from the passage of this act, be authorized to be made leading from Boston to Lowell." The defendants' road had been authorized, without any compensation to the plaintiffs, to run between the same places. The court held this clause a contract, and binding on the legislature, although their attention was strongly directed to the argument that a legislature cannot cede away its rights of eminent domain. At the same time, the court held that the second road might be constructed, if provision had been made to pay the plaintiffs a suitable compensation for the invasion of their rights. In other words, it was held that the language of the restrictive clause did not amount to a complete renunciation of the state's rights of eminent domain.

The Supreme Court of Connecticut adopted the same doctrine in East Hartford v. Hartford Bridge Company 3 (1845). In the case of The Bank of the Republic v. The County of 1 11 New Hamp. R. 19. 2 2 Gray's R. 1.

3 17 Conn. R. 78.

Hamilton1 (1858), the Supreme Court of Illinois seems to lean in favor of the principle announced by the New Hampshire court, that, in incorporating a bank, the state cannot limit its powers of taxation; although it must be confessed, this conclusion, if reached at all, is reached in a very blind and halting manner.

§ 578. In Pennsylvania the question has repeatedly arisen. The first case in order is Easton Bank v. The Commonwealth 2 (1849). The bank had been incorporated, among others, under a general statute. This statute provided that these banks should be created" upon condition" that, among other things, they should pay a certain amount of tax. Subsequently the legislature raised the rate of taxation, and the contention was that the statute making this increase in the rate was void. The court held it valid, because the original law under which the banks were organized, contained no stipulation that the tax should not be changed. With this decision I entirely agree; but the court also made some observations which would imply that even had the charter contained such an express restriction, it would not have been binding.

8

so as

In Mott v. The Pennsylvania Railroad Company 3 (1858), the Supreme Court of that state distinctly and emphatically took the ground that a legislature has no power to alienate any of the rights of sovereignty - such as that of taxation to bind future legislatures, and that any contract purporting to have such an effect is void; that the rights of sovereignty are a trust, to be exercised for the benefit of the people, not to be abandoned or bargained away, at the discretion of their agents.

§ 579. But in the Iron City Bank v. Pittsburg (1860), the same court receded from the ground taken by them in the case last cited, and held the following to be the rules of law which are authoritative throughout the country: "A grant of land or of corporate franchises by an act of legislation, is a contract between the state and the grantee, the obligation of which a subsequent legislature cannot impair. If the legislature, in

1 21 Illinois R. 53.

3 6 Casey's R. 9.

2 10 Barr's R. 442.

4 1 Wright's R. 340.

creating a corporation, prescribe a rate of taxation, and expressly release the power to impose further taxes, or do not expressly reserve the power to themselves, a subsequent taxlaw does impair the obligation of the contract and is void. The evident effect of these propositions is to place the taxing power of the state government at the disposal of the contracting parties. The legislature representing the people are one of the contracting parties; the corporators are the other. The theory is that the legislature represents the people for the purpose of making contracts as well as of making laws; that the grant of a franchise is not merely an act of legislation, but is also a contract, and that the legislature holds the taxing power, and therefore may bargain it away, precisely as they hold and may grant the power of corporate franchises." These conclusions were stated to be those of a series of decisions made by the United States Supreme Court, whose authority was followed.

§ 580. A prolonged and somewhat acrimonious discussion of the nature and effect of collateral stipulations in charters, which purport in terms to limit the legislative power, was a very prominent event in the judicial history of Ohio. In 1845 a general banking law was passed, authorizing the incorporation of banks. The 60th section of this act required the banks to pay each year six per centum of their profits to the state, and declared that such amount should "be in lieu of all taxes to which such company or the stockholders thereof on account of the stock owned therein, would otherwise be liable." Many banks were organized and went into operation. In the year 1851 a statute was passed by the legislature, having the effect to increase the rate of taxation laid upon these banks. In the same year a new constitution of Ohio was adopted, which required the rate of taxation upon banks to be made uniform with all other taxes laid upon property. Pursuant to this constitution another statute was passed in 1852 raising the rate of tax. The state officers having made attempts to collect the increased tax, suits were brought by certain banks to test the validity of the new legislation. The following cases were carried to the Supreme Court of Ohio: De Bolt v. The Ohio Life Insurance