Bank of Toledo v. City of Toledo (1 Ohio St. 622, 1853)

Bartley, O. J.

The only question for adjudication presented by the agreed statement of the parties in this cause, is whether the statute of this state of the 21st of March, 1851, “providing for a ■Jax upon banks and bank and other stocks the same as other' property is taxable by the laws of this state,” so far as the same authorizes the assessment of a tax upon the property of the Bank of Toledo, is repugnant to that clause of the tenth section of the first article of the constitution of the United States, which is in the following words, to wit: “No state shall pass any law impairing the obligations of a contract.” The constitution of Ohio, in force-when this law was enacted, contained substantially the same provision, declaring that the legislature should pass no “law impairing the validity of contracts.” So that, if the law be repugnant to-the constitution of the United States, it was likewise in conflict with the constitution of the state. The investigation of this question involves the following direct inquiries:

First. Whether the statute of this state of the 24th of February, 1845, entitled “ an act to incorporate the State Bank of Ohio and other banking companies,” (which is claimed to be the charter of the Bank of Toledo as well as that of numerous other banks in the State,) constitutes a contract between the State of Ohio on the one part, and the Bank of Toledo, or the stockholders of that bank, on the *other, within the purview and true intent of the above mentioned prohibitory clause of the constitution of the United States.

Secondly, whether the 60th section, above recited, relating to taxation, contains a material or essential stipulation in such contract, not subject to change or modification by the law-making power of the state, without the consent of the bank.

These inquiries, which distinctly and directly arise in this case, present questions of very great interest and importance. The question whether the charter of an incorporated bank is a contract within the operation of the Constitution of the United States has occupied the chief attention of the counsel on both sides, been argued at very great length both orally and upon paper, and submitted, with all the lights which extensive research could bring to our aid. The other causes argued and submitted with this case, involved also other questions; but this cause involves the single subject presented by the agreed statement of the parties. The Bank of Toledo claims exemption from taxation imposed by the law of 1851,on the alleged ground that its charter is a contract within the operation of the constitution ; and whether the charter of this bank be such contract or not, is the main question presented by the parties for our determination. And, although this case might, perhaps, be decided upon other ground, yet since this question, if decided against the plaintiff, would be decisive of the whole case, it would seem like sheer evasion on the part of the court to decline its determination on the pretence that it did not arise in the ease. Such is the nature and importance of the question, and the frequency of its occurrence, that a majority of the court feel no disposition to-■evade the responsibility of its determination ; but deem it a duty ■to meet it fully, fairly and frankly, with the expression of an opin> ion formed on the most careful and mature consideration.

1. Does the statute of Ohio of the 24th of February, 1845, entitled “ An act to incorporate the State Bank of *Ohio and other banking companies,” constitute a contract within the operation of the above mentioned prohibitory clause of the constitution of the United States?

It is not claimed on the part of the plaintiff that the law of 1851 impairs the obligation or validity of any contract between the bank and any other person, for the performance of any act or in relation to property in the ordinary signification of that term. But it is claimed that the law of 1845, containing the charter of the ■company, is a contract between the State of Ohio on the one side, and either the Bank of Toledo or the corporators of the bank on the other; and that the obligation or validity of such contract is impaired by the law of 1851. It is not pretended that any right ■of private property, in its ordinary sense, or any contract relative thereto, has been interfered with; but it is claimed that the civil privileges of the company, conferred by its franchise, consisting of its rights to act and continue its existence in the capacity of a corporation, to issue its paper for circulation as a currency or money to be exempt from all taxation, except as specified in the sixtieth section of the law, etc., constitute the subject-matter of a contract, and are in fact property, the right to which has been violated or impaired. The complaint, therefore, is not that the private prop, ■erty of the corporation, or any contract relating thereto, has been invaded; but that its political rights or exclusive privileges have been impaired.

That the restrictive clause of the constitution of the United States, above mentioned, was designed to embrace contracts respecting private property, or some object of pecuniary value, capable of estimation in a court of justice—indeed, -any thing which in the ordinary sense constitutes the proper subject-matter of a contract, is not controverted. But whether it was designed to comprehend the political relations between the government and its citizens, the civil privileges and immunities of corporations, and to restrain the •state in the regulation of its civil institutions adopted for internal government, is the question here presented.

*A full examination of the general question, whether the charter of a private corporation be a contract, which is involved in this inquiry, would seem to be requisite, to elucidate the true nature and present bearing of the subject under consideration.

It has been adjudged by the supreme court of the United States, that a state law which interfered with and changed the arrangement made by contract for the disposition of private property; and also at the same time interfered with the franchise of a private-corporation, was unconstitutional and void. Such is the effect of the decision in the case of The Dartmouth College v. Woodward, 4 Wheat. 518. The doctrine that the charter of a private corporation is a contract within the operation of the restrictive clause of the constitution of the United States, has taken its origin from this case, which, as a judicial authority, does not, in fact, sustain it, as-I shall have occasion hereafter to show; yet the doctrine has been recognized and approved by the courts of a number of the states, including the supreme court of Ohio. And it is not to be denied that it has the sanction of authority entitled to great weight and very high consideration. But it is equally undeniable that; this doctrine has been recognized by courts, and promulgated by elementary writers, in very general terms, and without a distinct and definite view to the real and authoritative effect of the decision of the supreme court of the United States, upon which it was-founded, until it has become, to some extent, a subterfuge for fraud and a means of shielding corporations from responsibility and correction for the abuse of their corporate franchises.

The reason upon which this doctrine has been based has not. been universally satisfactory; and the evil consequences to the-community, of its general and loose application, in protecting corporations from responsibility for abuse, have made it so frequently a subject of controversy, that, notwithstanding the respect entertained for the authority by which it appears to have been sanctioned, it can not be ^claimed in fact to be unquestioned law. Mere precedent alone is not sufficient to establish and settle forever a legal principle. Infallibility is to be conceded to no human tribunal. A legal principle, to be well settled, must be founded upon sound reason, and tend to the purpose of justice. The mere-authority of no judicial opinion can place it beyond the reach of inquiry into its reason or its justice. We are taught by an author-illustrious for his profound knowledge of the common law, that law is the perfection of reason, and that it is the reason and justice-of a legal principle which give to it its validty. True it is, there-are instances where the maxim Communis errorfacitjus, maybe applicable; but it is not applicable to a doctrine founded upon a fiction •or a fallacy, and which, in its consequences, is subversive of the great ends and purposes of justice. Chancellor Kent, in his Commentaries, vol. 1, page 477, says “ That there are more than one thousand cases to be pointed out in the English and American books of reports, which have been overruled, doubted, or limited in their application. It is probable that the records of many of the courts in this country are replete with hasty and crude decisions; and such cases ought to be examined without fear, and revised without reluctance, rather than to have the character of our laws impaired, and the beauty and harmony of the system destroyed by the perpetuity of error. Even a series of decisions are not always evidence of what the law is.”

I would not be understood as repudiating the aid of precedents, which are properly regarded as the great storehouse of experience, not always tobe followed, but tó be viewed as beacon lights in the progress of judicial investigation, which, if they do not prove deceptive and conduct us to the paths of error, may light our footsteps in the road to truth. Lessons of wisdom are to be extracted from the errors as well as the rightful judgments of mankind; while the one admonishes and warns, the other stands forth for imitation and adoption. Had precedent alone been consulted and followed, the great reforms in the progress of mankind would *never have been adopted. ■Governments were formerly regarded and conducted chiefly for the aggrandizement of those who possessed and controled the arm of civil power. Sovereignty was supposed to originate with and emanate from the successful leader, who acquired and held it by force under a claim of hereditary title; and the civil government was managed for the benefit of rulers rather than ruled. But our institutions have been constructed upon an entirely different basis. The supreme civil power is here recognized as originating from, and resting in the people, and government regarded as an institution whose sole object is the benefit of the governed. Absolute power is delegated to none ; and those who are authorized to administer any function of' civil power are but agents entrusted with delegated authority to be exercised only for the benefit of those who confer it. Here .all civil authority delegated by the people or conferred by the gov•ernment is a trust, which, in its nature, must be at all times subservient to the public good. And no individual ownership or proprietary interest can be created in a grant of civil authority. Tho principles of our political system, in some of the details of the public affairs, have been of gradual development; if we follow closely the examples and doctrines of other times and other systems, in determining the nature and extent of the powers distributed and •adjusted among the institutions of our own system, we1 shall be very certain to err, and to be led often to conclusions inconsistent with the true aim and object of our own system of government. A very numerous class of precedents, therefore, are useful in disclosing rather what we should avoid, than what we should follow. In the determination of a great question like that under consideration, recurrence should be had to fundamental principles, and the authority of precedent regarded so far only as there is to be found a conformity to reason, and the true nature of our own government.

The distinction between the rights of private property and the political rights, privileges, and immunities conferred or authorized by •law, from motives of public policy, is ^deeply marked and founded in the nature of the subject-matter to which they respectively pertain. The right of private property is an original and fundamental right existing anterior to the formation of the government itself; the civil rights, privileges and immunities authorized by law, are derivative—mere incidents to the political institutions of the •country, conferred with a view to the public welfare, and therefore trusts of civil power to be exercised for the public benefit. The theory of our government is founded upon the doctrine that all men are born equal, and this principle of equality of political rights lies at the foundation of all our civil institutions. The creation of vested rights, therefore, in the nature of private property, in the special authority and exclusive privileges and exemptions conferred by law upon a few, would bo destructive of this fundamental principle of our government. The primary object of the social compact is to protect man in his pursuit of happiness by maintaining this equality of political rights. Government is the necessary burden imposed on man as the only means of securing the protection of his rights. And this protection—the primary and only legitimate purpose of civil government—is accomplished by protecting man in his rights of personal security, personal liberty, and private property. The right of private property being, therefore, an original right, which it was one of the primary and most sacred objects of government to secure and protect, is widely and essentially distinguished in its nature, from those exclusive political rights and special privileges and immunities which are created by law and conferred upon a few from motives of public policy in the administration of the government. The fundamental principles set forth in the hill of rights in our constitution, declaring the inviolability of private property, and prohibiting the enactment of any law impairing the obligations of contracts, were evidently designed to protect the right of private property as one of the primary and original objects of civil society, without any reference to the derivative ^rights or exclusive privileges and immunities which might be acquired by a few persons from the political institutions of the government. Independent of the restraints imposed by the declaration of these fundamental principles, the enactment of a law invading the right of private property, or impairing the obligation of a contract, would be a violation of one of the great primary objects for which the government itself was instituted, a usurpation of political power; and the law might well be declared to be void without any express constitutional provision to that effect. Smith’s Com. on Constitutional and Statutory Construction, 270. Taylor v. Porter, 4 Hill, 146 ; Varick v. Smith, 5 Paige, 159; Bowman v. Middleton, Bay, 252.

Much has been said about the omnipotence of parliament in England, where there exists no written constitution; but it is admitted and well understood that the omnipotence of parliament signifies nothing more than that parliament is supreme in the exercise of the legislative power of the government, and in that, uncontrolled by any superior. And it is not pretended in that body that its powers of legislation are unlimited in their exercise by the-great and fundamental principles of the social compact. "We learn from an early period in the parliamentary history of Great Britain,, that measures were opposed and defeated in that body, because of a tendency to violate the fundamental and primary objects of government itself, and, therefore, not within the scope of its authority. So that the doctrine that the power of parliament is omnipotent may be considered as resting in theory only. Pari. Hist., 33, 315; 9 Gill and Johns. 409. Some of the most eminent judges of England have never hesitated to declare an act of parliament void, which was against common right and natural justice, or in violation of those original and fundamental rights for the security of which government was instituted. Bracton L. 4, 228; Dr. Bonham’s case, 8 co. 234, per Coke, C. J.; London v. Wood, 8 Mod. 687, 688, per Holt, C. J.; Day v. Savage, *Hobart, 87, per Hobart, C. J.; The Regents of the University of Md. v. Williams, 9 Gill & Johns. 408, 409, per Buchanan, C. J. Yet, notwithstanding all this, the-right of parliament to repeal, modify, and regulate the charters of private corporations has been acknowledged upon all hands, often, exercised, and always sustained.

The attempt was made and defeated in the- British Parliament,, to maintain the special and exclusive rights,' privileges, and immunities of a private corporation upon the same ground with the-rights of private property secured by magna charta. When, in 1783, a bill was introduced into parliament by Mr. Fox, for the-purpose of repealing the charter of the East India Company, a charter purchased by the payment of a large bonus, and stamped by repeated acts with the faith of the government, the primary objection made by those who opposed it was “ that the bill was an attack upon the chartered rights of men.” This objection was met-by Mr. Burke, the most learned and profound statesman of his age, with a force and power of argument rarely if ever surpassed by any other argumentative effort. From the speech of Mr. Burke on that occasion, the following extract is in point and appropriate :

“As to the first of these objections, I must observe that the phrase-of ‘the chartered rights of men,’ is full of affectation, and very unusual in the discussion of privileges conferred by charters of the present description. But it is not difficult to discover what end that ambiguous mode of expression so often reiterated is meant to answer.

“ The rights of men, that is to say, the natural rights of mankind, are indeed sacred things; and if any pnblic measure is proved mischievously to affect them, the ocject ought to be fatal to that measure, even if no charter at all could be set np against it, If these natural rights are further affirmed and declared by express-covenants—if they are clearly defined and secured against chicane —against power and authority, by written instruments and positive engagements, they are in a still better condition; they partake not-only of the sanctity of the object so secured, but of that solemn public faith itself, which secures an object of such importance,. Indeed, this formal recognition by the sovereign power of an original right in the subject, can never be subverted, but by rooting up ■the holding radical principles of government, and even of society itself. The charters which we call by distinction great, are public instruments of this nature—I mean the charters of King John and King Henry the Third. The *things secured by these instruments may, without any deceitful ambiguity,, be very fitly called the chartered, rights of men.

“ These charters have .made the very name of a charter dear to the heart of every Englishman. But, sir, there may be, and are, charters not only different in nature, but formed on principles the very reverse of the great charter. Of this kind is the charter of the East India company. Magna charta is a charter to restrain power and to destroy monopoly. The East India charter is a charter to establish monopoly and to create power. Political power and commercial monopoly are not the rights of men, and the rights of them derived from charters it is fallacious and sophistical to call the chartered rights of men. These chartered rights (to speak of such charters and of their effects in terms of the greatest possible moderation) do at least suspend the natural rights of mankind at large, and in their very frame and constitution are liable to fall into direct violation of them.

“But having stated to you of what description the chartered rights are which this bill touches, I feel no difficulty at all in acknowledging the existence of those chartered rights in their fullest extent. They belong to the company in the surest manner, and they are secured to that body by every sort of public sanction. They are stamped by the faith of the parliament; they have been bought for money, for money honestly and fairly paid; they have been bought for a valuable consideration over and over again.

“Those who carry the rights and claims of the company the furthest, do not contend for more than this; and all this I freely grant. But granting all this, they must grant to me in my turn that all political power which is set over men, and that all privileges claimed or exercised in exclusion of them, being wholly artificial, and for so much a derogation from the natural equality of mankind at large, ought to be some way or other exercised ultimately for their benefit.

“If this is true with regard to every species of political dominion and every description of commercial privilege, none of which can be original self-derived rights, or grants for the mere private benefit of the holders, then such rights or privileges, or whatever else you choose to call them, are all in the strictest sense a trust, and it is of the very essence of every trust to be rendered accountable, and even totally to cease, when it substantially varies from the purposes for which alone it could have a lawful existence. This, I conceive, sir, to be true of trusts of power vested in the highest hands, and of such as seem to hold of no human creature. But about the application of this principle to subordinate derivative trusts, I do not see how a controversy can be maintained. To whom then would I make the East India company accountable ? Why, to parliament, to be sure; to parliament, from whom their trust was derived; to parliament, which alone is capable of comprehending the magnitude of its object and its abuse, and alone capable of an effectual legislative remedy.”

The true nature of the franchise of a private corporation is here portrayed in clear and comprehensive language. We are here told that it is an institution to establish monopoly *and to create power; that to speak of such charters and their effects in terms of the greatest possible moderation, they do at least suspend the natural rights of mankind at large, and in their very frame and constitution are liable to fall into a direct violation of them ; that all special privileges of this kind, claimed or exercised in exclusion of the greater part of the community, being wholly artificial, and for so much a derogation from the natural equality of mankind at large, ought to be some way or other exercised ultimately for their benefit; and that they are not original self-derived rights, or grants for the mere and sole private benefit of the holders, but rights and privileges, which in the strictest sense are derivative trusts, and from their very nature accountable to the power which created them.

The question under consideration being a question of constitutional and statutory construction, must be determined by the application of those well settled and well known rules of interpretation, by which the true intent and legal effect of an instrument are ascertained.

If there be anything well settled in the law relating to corporations, it is that their charters, being grants of power or authority in derogation of the natural rights and equality of men, must be construed favorable to the public, and strictly as against the corporation, in whose favor nothing can be claimed by implication. The Proprietors of the Stourbridge Canal v. Wheeling, 2 B. & Ad. 793; 4 Cruise’s Dig. 567; United States v. Arredondo, 6 Pet. 738; Perrine v. The Chesapeake and Delaware Canal Co., 9 How. 172; The Cincinnati College v. The State, 19 Ohio, 110. In the case of the Charles River Bridge v. Warren Bridge et al., Chief Justice Taney, in delivering the opinion of the court, said that, “The continued existence of a government would be of no great value, if by implications and presumptions it was disarmed of the powers necessary to accomplish the ends of its creation, and the functions it. was designed to perform transferred to the hands of privileged corporations.”

*It is a rule of interpretation, of universal application, that a law is to be so construed as to carry out the intention of the maker, and that to ascertain that intention, not merely is the language of the law to be looked to, but also the subject-matter to which it relates, the evil provided against, and the attending circumstances and understanding at the time the law was framed.

In addition to the aid. of these rules of construction and interpretation, in ascertaining the true meaning of the restrictive clause of the constitution of the United States, which declares that no state shall pass any “ law impairing the obligations of contracts the following expressive language of Chief Justice Marshall, in delivering the opinion of the court, in the case of Dartmouth College v. Woodward, 4 Wheat. 627, will tend to the elucidation of the subject.

“It has been argued that the word ‘contract,’ in its broadest, sense, would comprehend the political relations between the government and its citizens; would extend to offices held within a state for state purposes, and to many of those laws concerning civil institutions, which must change with circumstances, and be modified by ordinary legislation ; which deeply concern the public, and which, to preserve good government, the public judgment must, control. That even marriage is a contract, and its obligations are affected by the laws respecting divorces. That the clause in tbm constitution, if construed in its greatest latitude, would prohibit these laws. Taken in its broad unlimited sense, the clause would be an unprofitable and vexatious interference with the internal concerns of a state, would unnecessarily and unwisely embarrass its legislation, and render immutable those civil institutions, which are established for purposes of internal government, and which, to sub-serve those purposes, ought to varywith varying circumstances That, as the framers of the constitution could never have intended to insert in that instrument a provision so unnecessary, so mischievous, and so repugnant to its general spirit, the term 1 contract ’ must be understood in a more limited sense. That it must be understood as intended to guard against a power of at least doubted utility, the abuse of which had been extensively felt; and to restrain the legislature in future from violating the right to property. That anterior to the formation of the constitution, a course of legislation had prevailed in many, if not in all of the states, which weakened the confidence of man in man, and embarrassed all transactions between individuals, by dispensing with a faithful performance of engagements. To correct this mischief by restraining the power which produced it, the state legislatures were forbidden ‘ to pass any law impairing the obligation of contracts,’ that is, of contracts respecting property, under which some individual could claim .a right to something beneficial to himself; *and that since the clause in the constitution must, in construction, receive some limitation, it may be confined, and ought to be confined, to cases of this description; to cases within the mischief it was intended to remedy.

“ The general correctness of these observations can not be controverted. That the framers of the constitution did not intend to restrain the states in the regulation of their civil institutions, adopted for internal government, and that the- instrument they have given us is not to be so construed, may be admitted. The provision of the constitution never has been understood to embrace ■other contracts than those which respect property, or some object •of value, and confer rights which may be asserted in a court of justice.”

Again, Chief Justice Marshall adds, in reference to the rights claimed in behalf of the corporation (see page 644 of same opinion):

“ It is more than possible that the preservation of rights of this ■description was not particularly in the view of the framers of the constitution when the clause under consideration was introduced into that instrument. It is probable that interferences of more frequent occurrence, to which the temptation was stronger, and of which the mischief was more extensive, constituted the great motive for imposing this restriction on the state legislatures.”

This lucid exposition of the constitutional provision in question establishes the following positions:

1. That the term “ contract" as used, in this clause of the constitution, is not to be taken in its broad and most comprehensive sense, but on the contrary, must be understood in its more limited signification, and as embracing no other contracts than those of the ordinary kind, respecting property or some right which is an object of value, capable of being asserted in a court of justice, and of the nature of the right of property.

2. That the term “ contract,” as used, does not comprehend the political relations between the government and its citizens, does not extend to the laws concerning the civil institutions of the states, established for the purposes of internal government, and which, to subserve those purposes, must change with circumstances and be modified by ordinary legislation; and that the framers of the constitution did not intend by this provision to restrain the states in the regulation of their civil institutions.

3. That the evil intended to be provided against, by this constitutional restraint, was a course of legislation which had *prevailed in many, if not in all. of the states, anterior to the formation of the constitution which had weakened the confidence of man in man, and embarrassed all transactions between individuals by dispensing with a faithful performance of contracts of the ordinary character; and that, at the time of the formation of the constitution-, the term contract, in its ordinary sense, was not understood to comprehend the laws of the states, adopted from motives of public policy, creating private corporations.

We have here, in clear and explicit language, the sense in which, the framers of the constitution employed the term “ contract," in this provision, the circumstances under which it was inserted in the-constitution, the mischief designed to be guarded- against, and the opinion of the supreme court of the United States, by Chief Justice Marshall, that.the provision was never intended by the framers of the constitution to extend to grants of civil authority, or to restrict the legislation of the states in regard to their civil institutions adopted for internal government. It is fair to conclude that if the framers of the constitution had intended this restraint to.extend to the civil institutions of the states, and grants of civil authority, that language would have been employed, which, in its ordinary signification, would have been clearly understood to express it. In order to extend this constitutional provision so as to include the charters of corporations, it is necessary, in the first. place, to adopt the fiction that á law creating a private corporation is a contract; and in the second place, by implication, to attach to the law, as such contract, the condition that it is not to be subject to repeal or alteration at the discretion of the legislature ; and in the third place, to enlarge and extend the meaning of this constitutional restraint, by a latitudinous construction, against the clear intention of the framers of the constitution ; and all this in violation of that well known rule of construction, that whatever relates to grants of civil authority, in derogation of the natural rights or equality of man, is to be strictly construed.

*The question touching the validity of the law of 1851 arising under the constitution of the United States, is not whether the law divests antecedent vested rights of property, but whether it impairs the obligations of a contract. Chief Justice Taney, in the case of Charles River Bridge v. Warren Bridge, 11 Pet. 539, says :

“ It is very clear that in the form in which this case comes before us, being a writ of error to the state court, the plaintiffs, in claiming under cither of these rights, must place themselves on the ground of contracts, and can not support themselves upon the principle that the law divests vested rights. It is well settled by the decisions of this court that state law may be restrospective in its character, and may divest vested rights and yet not violate the constitution of the United States, unless it also impairs the obligations of a contract. In Satterlee v. Mathewson, 2 Pet. 413, this court, in speaking of the state law then before them, and interpreting the article in the constitution of the United States which forbids the states to pass laws impairing the obligations of contracts, uses the following language: ‘ It (the state law) is said to be retrospective ; be it so. But retrospective laws that do not impair the obligation of contracts, or partake of the character of ex post facto laws, are not condemned or forbidden by any part of that instrument,’ (the constitution of the United States); and in another passage in the same case the court say : 1 The objection, however, most pressed upon the court and relied upon by counsel for the plaintiff in error was that the effect of this act was to divest rights which were vested by the law in Satterlee. There is certainly no part of the constitution of the United States which applies to a state law of this description; nor a*e we aware of any decision of this, or any circuit court which has condemned such a law upon this ground provided its effect be not to impair the obligation of a Contract.’ The same principles were reaffirmed in this court in the last case of Watson and others against Mercer, decided in 1834, 8 Pret. 110: ‘ as to the first point (say the court) it is clear that this court has no right to pronounce an act of the state legislature void, as contrary to the constitution of the United Stales, from the mere fact that it divests antecedent vested rights of property. The constitution of the United States does not prohibit the states from passing xestrospective laws generally, but only ex post facto laws, which relate only to penal and criminal proceedings, and not to civil proceedings which effect private rights restrospectively.”

The general principle that one legislature is competent to repeal or modify any act which a former legislature was competent to pass, and that one legislature can not abridge the powers of a succeeding legislature, is distinctly sanctioned as to all general legislation by the supreme court of the United States in Fletcher v. Peck, 6 Cranch, 87. But it is said that where absolute rights of property have been «acquired and vested by conveyances of the title to, or delivery of the possession of property, under the authority of a law, or where contracts have been made under and in pursuance of the authority of a law, and rights thereby vested, the simple repeal of the law does not divest the rights thus vested. This may be correct as to rights acquired from conveyances or contracts under the law, and pursuant to its authority; but it can not bo applicable to rights conferred by the law in and of itself, which are inherent in its terms and can continue only as incidents to the law itself. When property is transferred by conveyance or delivery of possession under the authority of a law,the vested right attaches as an incident to the property, and adheres to and passes with it. Bo, also, where a contract is made under the authority of a law, the right of property acquired arises not from the law itself but from the contract to which it pertains as an incident. And, in either case, the prospective repeal of the law could not divest the rights thus acquired, originating not in the law itself but in acts done under the law, and which attach as incidents not to the law, but to the property conveyed or contract made under the law. But the franchise of a corporation which consists, not of the rights of property acquired by conveyances, contracts or investments under the authority of the charter, but of the civil rights, privileges and immunities conferred by the law itself and inherent-in its terms, is essentially an incident of the law itself, dependent'upon the continuance ■of the law, and extinguished by its repeal. For this reason it.is claimed that the charter of a private corporation is a contract, which from its nature implies a surrender of the legislative power of amendment or repeal. This implied relinquishment of a part of the legislative power of the state, is claimed on the ground of the ■ character of the corporation created, which is alleged to be a mere matter of private interest, unconnected with the administration of the public affairs, and therefore not liable to be made subservient to the public welfare by legislative control.

*A corporation is a civil institution. It is established by a

.law of the state from considerations of public policy. Its existence, its capacities, and its powers are all conferred by law from some real or supposed public benefit to result from it. If this mere creature of the law thus instituted or established, be not a political institution of the state, it would be difficult to conceive under what other denomination it could be placed by any sensible distinction which could be invented. Mr. Kyd, a reputable elementary author, has furnished the following comprehensive and descriptive definition : “ A corporation, or body politic, or body incorporate, is a collection of many individuals united in one body, under a special denomination, having perpetual succession under an artificial form, and vested by the policy of the law with a capacity of acting, in several respects, as an individual, particularly of taking and granting property, contracting obligations, and of suing and being sued; of enjoying privileges and immunities in common, and of exercising a variety of political rights, more or less extensive, according to the ■design of its institution, or the powers conferred upon it, either at the time of its creation or at any subsequent period of its existence.’" Kyd on Corp. 13. In England, a corporation is usually created by .a charter granted by the King, but sometimes by an act of Parliament. But the supreme court of the United States say, in Bank of Augusta v. Earle, 13 Pot. 519, “ In this country, no franchise can be held which is not derived from the law of the state.” In the latest edition of Angelí & Ames on Corp. pp. 3 and 4, the authors ■say: “The words incorporation and corporation are frequently confounded, particularly in the old books. The distinction between them is, however, obvious; the one is a political institution; the •other only the act by which that institution is created. When a corporation is said to be a person, it is understood to be so only in certain respects and for certain purposes, for it is strictly a political institu t-ion.” It matters not that private or individual interests maybe invested in tbe corporation, or under the authority of the charter, so far1 *as this denomination of the institution is concerned. Individual interests or investments in private property exist under a great variety of the civil institutions of the state. Private institutions are those which are created or established by private individuals for their own private purposes. Public institutions are those which are created • and exist by law or public authority. Some public benefits or rights may result from the institutions of private individuals or associations. So also some private or individual rights may arise from public institutions. The only sensible distinction between public and private institutions is to be-found in the authority by which, and the purpose for which, they are created and exist. Because, therefore, a corporation may fall under the denomination of private corporations, in the artificial-distinction between public and private corporations, it is none the less a public or political institution. The distinction between public and private corporations is somewhat arbitrary, and by no means determines whether the corporation is a public or private institution. If the stock in a banking, railroad, or insurance corporation be exclusively owned by the government, the institution is denominated a public corporation ; but if a private indvidual be-allowed to own a single share of the stock, in common with the government, it is said that it becomes a private corporation. Eleemosynary corporations, established for the purpose of public charity or for the advancement of religion, education, or literature, upon donations or bequests made exclusively for these great and beneficial public purposes, without the right to or expectation of dividends, repayment or other individual or private interest therein in future, are denominated private corporations. But an incorporated village, in the use or expenditure of whose property the-citizens of the village have individual and private interests, and receive daily individual and private benefits, is denominated a public corporation. To say that an incorporated bank, authorized and created from considerations of public policy, and endowed by law with the extraordinary power and sovereign attribute of creating in *fact the circulating medium of the countiy, and regulating the standard of value, is not a public institution of the state adopted for the purposes of internal government, because it falls under the artificial denomination of private corporations, would be arrogant absurdity. And it would be equally as absurd to treat a railroad corporation as a private institution, which is endowed with extensive powers, and the extraordinary sovereign authority of exercising the right of eminent domain by taking private property for public purposes. In truth and in reality, whatever arbitrary or fictitious distinctions may have been created by mere verbiage, these corporations are in fact public institutions, created by public authority, from considerations of public policy, and endowed with highly important civil power for the advancement of the public welfare. It would be unreasonable at least (tO' speak with the greatest moderation), to say that because some private interests are invested in these corporations, that, therefore, they must be denominated private institutions, and for that reason placed beyond the reach of responsibility to the law-making power of the state by which they were created. The most sacred rights of private property are made subservient to the public welfare. Under the right of eminent domain, the land which a man has purchased with the fruits of his own labor, even the very spot upon which he has erected his domicil, hallowed by all the associations of home, and to which he holds a title in fee simple evidenced by a patent from the government, may be taken from him, and that too-by a corporation, on the ground of subserving the public interests. Shall this be done, and yet the individual interests of the stockholders in this very corporation be placed above and beyond all subserviency to the public welfare, from the paltry consideration, that, although in fact and in reality a public institution, the corporation is technically denomination & private corporation ? To show the utter fallacy of this distinction, the East India company, which held and exercised the right, under a charter from G-reat Britain, to exclude their fellow subjects from the commerce of half the *globe, to administer an annual revenue of seven millions sterling, to command an army of sixty thousand men, and to dispose of the lives and fortunes of thirty milliions of their fellow-creatures, came under this denomination of private corporations 1

It is admitted upon all hands that the legislature has control over those corporations which are denominated public corporations, either to modify or to repeal their charters, as will best subserve the public interests. But it is claimed that the charters of those corporations, technically denominated private corporations, must be regarded as contracts, and, therefore, beyond the control and regulation of the law-making power of the state. And this, according to a late elementary work, is “ the main distinction between public and private corporations.” See Angelí and Ames on Corp. 27, 28. This distinction is not founded on sound reason, but is based upon a fiction, and has its origin in that short-sighted timidity of capitalists, which distrusts the integrity and stability of the government. The true reason which has given rise to this constructive fiction, is to be found in the following remarks of Angelí and Ames on Corp. 730, to wit: “ Corporate property and franchises, important- as they usually are in amount and extent, and undefended by the same strong sympathies which guard individual rights, offer a more tempting and easier spoil to misguided power, whether' it reside in the prince or the people.” It is this distrust ■of the government which has given rise to the doctrine that a charter is a contract; and the whole doctrine of vested rights, which has for its object the establishment of the- rights and property of corporations upon a footing of far greater sanctity and permanency than the rights and property of private persons, by placing them beyond the reach of the law-making power of the state. It is a humilating reflection to the friends of our republican institutions, that the efforts to place the rights and'property of corporations upon a footing of greater sanctity than those of private persons have been resisted with far greater success in England than they *have been in this country. The right of parliament to amend or repeal the charters of private coi*porations has for many years been undisputed. A late elegant and critical historian, in his work of standard authority (see Hallam’s Constitutional History of England, 101, 102), places the exercise of the power of the legislative authority to re-mould and regulate the rights and property of corporations upon far slighter grounds and reasons of convenience and public interest, than the rights and property of private persons. The doctrine of vested rights, advocated in this country, which places the adventitious rights resulting from this favored class of our political institutions upon ground of higher regard and sanctity than the fundamental rights of private property in the individual citizen, is truly startling when understood in all its bearings, and has its origin in a groundless and over-reaching timidity. The example of England presents us with no instances of the violation of corporate property and franchises, by the flagrant acts of “ misguided power.” Upon this subject, tho following remarks of the late venerable chief justice of this state-in our late constitutional convention, as the result of much observation and experience, are not inappropriate:

“Mr. Hitchcock, of Geauga, had said hitherto, and said still, that he saw no objection to giving the general assembly the power to repeal all acts of incorporation. The only consideration was the question of policy, as to the manner in which it should be exercised. Now, the general assembly always had the power to retain the right of repeal of each act of incorporation, and, in his opinion, it should have exercised it in nearly every instance, except in corporations for internal improvements.” See Debates and Proceedings of the late Constitutional Convention of Ohio, vol. 2, 619.

Upon this subject we have an example before us more triumphantly convincing than any argument or authority. In the State of New York, since the year 1828, out of abundant caution, and to protect the state and people from this pernicious doctrine of vested right, in regard to ^corporations, which the courts appeared disposed to adopt, the charter of every corporation which has been granted, has been by express statutory provision subjected to alteration, suspension, or repeal, in the discretion of the legislature. And in 1846 the same provision substantially was inserted in the constitution of that state; yet, notwithstanding this fact, it has-scarcely escaped the observation of any one that banking, railroad, and other corporations have grown up and existed undisturbed, and internal improvements, commerce, and enterprise generally,, flourished in New York to an extent unexampled even in any other state of the Union.

Whether regard be had to the franchise of the corporation alone or to the investments of private property under the authority of the charter, in either instance there exists no good reason for the distinction above mentioned between public and private corporations. The elements of a contract in the grant of the franchise exists in the one case, if it does in the other; and the rights of private property would be invaded or violated by a repeal of the charter in one instance, if they would be in the other. Take, for1 example, an incorporated village, an incorporated bank, and an incorporated college or church, all but the first of which being-denominated private corporations, and let a comparison be made. The citizens of the village apply for a charter. It is granted to them. The franchise confers special privileges, beneficial to the; whole village and each individual citizen of it. The citizens of the village accept the charter, and organize the corporation, and on the faith of the continuance of the charter, the corporate body, by taxation and otherwise, becomes possessed of a valuable property, both real and personal, to be held and used by the corporation for the benefit of the citizens of the village. Where are the ■constituents or elements of a contract in the case of the bank or the college, or church, which do not exist here? In the case •of the bank, the corporators may have a more immediate individual interest in the property of the bank than the citizens of the village in the property of their corporation; but this can not create the distinction, *for such is not the caso with the college or the church. The corporation officers and citizens of the village have at least as direct and immediate an interest in the property and business of their corporation as the trustees and members of the church, or the trustees or patrons of the college; and the citizens of the village, in fact, receive a more direct personal and pecuniary advantage from the franchise of their corporation than do the corporators of the college, or the trustees and members of the church, from the franchise.

Again, suppose a repeal of the charter of each one of these corporations. If the obligation of any contract be thereby impaired, or the rights of private property violated, in the one case, the same occurs in the case of each of the others. The franchise conferring special privileges, and civil power and authority in each case, is taken away, and the future benefits or advantages thereof lost by the persons directly or indirectly interested therein. The village ■corporation may be supposed to own extensive and valuable property acquired from taxes imposed upon the citizens of the village .and otherwise, consisting of real estate with valuable buildings thereon, fire engines, water works, stocks, choses in action, and ■other property acquired and held for the benefit of the citizens of the village; also, private individuals may have acquired important rights of property by contracts or obligations against the corporation, or by leases of buildings, water privileges, market places, licenses, etc. The unconditional repeal of the village charter strips that corporation of its franchise, and extinguishes all its civil authority, and indeed the corporate existence itself. This franchise, •or the civil authority and special privileges conferred by it, may have been highly beneficial and of great- value to the citizens of -the village. In case of a private corporation, it is this franchise or the authority and privileges conferred by it, which is said to constitute the subject-matter of the contract with the state, which is impaired by the repeal or amendment of the charter. If the franchise, or the civil authority and special privileges conferred by it, ■constitute the subject of a contract «in the latter case, I can conceive no good reason why it does not in case of the village. In both instances, a corporate franchise is granted by the state, and accepted by the corporators. In both instances, civil power and authority, and special privileges, beneficial to the corporators, are conferred. And in both instances, investments in private property are made under the authority of the charter, and on the faith of its continuance.

The investments in private property, made under the authority •of the charter, arise, not from the alleged contract between the ■corporation and the state, of which the corporate franchise is said to be the subject-matter, but from contracts between the corporation and other persons. The stock in a bank or railroad corporation is held by a contract between the corporation and the stockholder. Contracts are daily made with corporations, and almost daily investments are made in private property,'under the authority of their charters; but it is not claimed that the state is a party to any of these transactions. The complaint is not that either the contracts by which investments are made in the stock of the corporation, or the contracts by which the corporation acquires and holds private property, or the contracts out of which arise the liabilities of the corporation to other persons, are impaired by the alteration or repeal of the charter. It is the charter or franchise of the corporation, which is said to constitute the contract with the state, within the operation of the restrictive clause of the constitution. It does not necessarily follow, as a consequence of the repeal ■of the charter of a corporation, that the rights of property in the capital stock or the undivided profits, or other property acquired and held under the authority of the charter, will be impaired or lost to those beneficially interested therein. The corporation itself, as an artificial person in the management of the corporate property and business, acts, in fact, only as a trustee for the individual corporators and those interested. “The great object of an incorporation,” says Chief Justice Marshall, “ is to bestow the character and properties of individuality on a «collective and changing body of men.” Providence Bank v. Billings et ail., 4 Pet. 561. True it is, that, by the common law, on the dissolution of a corporation, its real estate reverts to the grantor and his heirs; its-personal estate vests in the state; and the debts due to and from it are wholly extinguished. But the common law, in this particular, is modified by statute, so that such can not be claimed as the necessary consequence of the exercise of the right of repeal. Even, by special provision in the act repealing the "charter of a corporation, all the rights of property originating under the authority of the charter can be protected and saved for those beneficially interested. The corporation may be allowed to retain its corporate-powers, so far as may be necessary to enable it to settle and close up its affairs, and distribute its stock or property to those interested or equitably entitled to it; or the same object may be accomplished through the intervention of trustees oí1 assignees duly authorized and appointed for that purpose. 2 Kent Com. 247 ; Campbell et al. v. The Mississippi Bank, 6 How. (Miss.), 674; Nashville Bank v. Petway, 3 Humph. (Tenn.), 522 ; James v. Woodruff, 10 Paige, 541.

But in case of the repeal of the charter of a village corporation,, the difficulty in protecting fully the rights of private property invested under the authority of the charter is at least as great as in the case of that of a private corporation. By the repeal of the-charter of a bank, nothing is lost by the corporators but the franchise of the corporation. Provision can be made by which the liabilities of the corporation can be enforced, its debts collected, and the share of each stockholder in the capital stock and undivided profits fully protected and refunded. In case of the repeal of the-charter of a village, a college, or a church, the difficulty of refunding or distributing the corporate property to the beneficiaries according to their respective interests therein, may be very considerable ; but, in either of these three cases, the corporate property can. be protected and managed through the ^intervention of trustees appointed from time to time, so as to accomplish the object-of the association, without the convenience or aid of the corporate franchise.

It is said that the village corporation is connected with the administration of the public affairs, and therefore subject to control and regulation by the legislative power. But we should riot be induced by mere names or technical phrases to overlook the substance and. reason of the thing. Is not ah incorporated bank, which is created by the authority of law, and endowed with an attribute of sovereignty, by which it is enabled to create the circulating medium of the country, and to control the standard of value, an institution connected with the internal government, or the administration of the public affairs? With what show of reality can it be claimed that a railroad corporation, endowed with extensive powers, and authorized to take and appropriate private property for public use, upon the ground that its purposes are subservient to the public welfare, is a mere private institution, disconnected with the affairs of the government? A college has for its object the advancement of the cause of education, and a church the cause of religion—both objects of public interest, and both recognized in the constitution-of the state as objects deserving the encouragement and favor of the government, from the fact of their being auxiliary to the successful administration of the public affairs. With what accuracy or propriety can either a college or a church, when instituted under the public authority of an act of incorporation, and having for its object these public interests important to the purposes of government, be denominated or treated as a mere private institution ?

It is said that in private corporations property is invested by persons for private or individual purposes. But this is not certainly more peculiarly the case in a college or a church corporation, than it is in a village corporation. Private property is frequently acquired by the latter by voluntary subscription and donation, as well as by the former, and the private and individual interests in the property of the ^village corporation is more immediate and direct than in that of the college or church corporation.

It is apparent, from a thorough examination of the subject, that the distinction between public and private corporations, as ordinarily recognized in the books, is a mere arbitrary distinction, without foundation in the nature, objects, incidents, or property of this class of institutions. And in truth there exists no sound and well-founded reason for treating the charters of those corporations usually called private corporations as contracts, while the charters of those known as public corporations are not so considered; or for denominating the former as mere private institutions, and the latter as public institutions; and the paramount considerations of the public interests or general welfare would certainly require that the former should