Matheny v. Golden (5 Ohio St. 361, 1856)

Brinkerhoff, J.

This is a bill in chancery, filed in the court of common pleas of Athens county, to which there is a general demurrer. The demurrer having been overruled, and a decree taken for the complainant in the common pleas, the case was appealed by the defendant to the district court of that county, and by that court reserved for- decision here on the same state of pleading. The case made by the bill is substantially this :

By two several resolutions of the congress of the United States, passed on the 23d and 27th days of July, 1787, the then board of treasury were authorized and empowered to contract with any person or persons for a grant of a tract of land, in the first of said resolutions described, lying on the northwest side of the Ohio river, and within the now State of Ohio ; one of the terms of the contract for the grant of said tract to be, that not more than two complete townships should be given perpetually “ for the purposes of an university; ” said townships to be laid off by the purchasers of said tracts as near as possible in the center of the first million and a half of acres that said purchasers should pay for, to be applied to the intended objects, by the legislature of the State thereafter to be formed and admitted into the Union, and within the limits of which said tract might be, and which is now the State of Ohio. Under and by virtue of said resolutions, the board of treasury, on the 27th of October, 1787, entered into a contract with Manasseh Cutler and Winthrop Sargent, as agents for the directors of the Ohio Company of Associates, for the sale of said tracts, and on the terms and conditions prescribed in the said resolutions.

That thereupon the agents of said Company of Associates laid off and appropriated, for the purposes of a university, the whole of the eighth and ninth townships of the fourteenth range of townships in said company’s purchase. That, by authority of an act of congress passed April 21st, 1792, the said tract, including the two townships aforesaid, was, in the same year, patented by the President of the United States to the directors of the Company of Associates, whereby the said two townships of land became and were given and granted perpetually for the purposes of a university.

That the legislature af the State of Ohio, on the 18th day of February, 1804, passed an act, entitled “ an act establishing an university in the town of Athens,” which, among other things, enacts and declares, that “ there shall be an university instituted and established in the town of Athens, in the ninth township of the fourteenth range of townships, within the limits of the tract of land purchased by the Ohio Company of Associates, by the name and style of the ‘ Ohio University,’ for the instruction of youth,” etc., a copy of which act is exhibited with, and made part of the bill of complaint. The said act also provides that there shall be and forever remain in the said university, a body politic and corporate, by the name and style of the “ President and Trustees of the Ohio University; ” that the said two townships, numbered eight and nine, be and are thereby vested in said corporation, for the sole use, benefit, and support, of said university forever; and the said act, and an act amendatory thereof, passed February 21st, 1805, authorize and enjoin-it on said corporation, in the manner, on the terms and conditions, and for the rents therein prescribed, to lease said lands on leases for ninety-nine years, renewable forever ; and, to render said lands as productive as possible to the university, the said act of incorporation further declares, that “ the lands in the two townships appropriated and vested as aforesaid, with the buildings which are or may be erected thereon, shall forever be exempted from all State taxes.” 2 O. L. 205. That thereupon the said Ohio University was duly organized and put in operation as a body corporate, in accordance with said act, and has so ever since remained. That the complainant is one of the lessees," at a fixed rent, of parcel of said two townships from the university, under the authority of said act of incorporation, and files his bill for himself, and seven hundred and seventy other lessees of other parcels of said two townships, having a common interest in the question involved, with their consent, and by their request. That said exemption from State taxes was a material consideration with him and those on whose behalf he complains, and forms, in fact, a part of said contracts of lease betw’een the lessees and the university.

On the 13th of April, 1852, the legislature of Ohio passed an act, entitled an act for the assessment and taxation of all property in this State, and for levying taxes thereon, according to its true value in money,” which act, among other things, provides that “ property, held under a lease for a term of fourteen years, belonging to the State, or to any religious, scientific, or benevolent society or institution, whether incorporated or unincorporated, and school or ministerial lands, shall be considered, for all purposes of taxation, as the property of the person holding the same, and shall he listed as such by such person, or his agent, as in other cases.” Swan’s Statutes 903. And in the first section of an amendatory act, passed March 12, 1863 (Swan’s Stat. 924), which exempts from taxation certain property of institutions of learning, provides that such exemption “ shall not extend to leasehold estates of real property held under the authority of any college or university of learning of this State.” The bill finally states in detail that, in pursuance of the acts last before mentioned, a State tax, amounting to over one thousand one hundred dollars, has been assessed on said leasehold estates, and that the defendant, as treasurer of Athens county, is about to proceed to collect the same by distress. Thére is a prayer for an injunction, and for general relief.

The first question presented here, is, whether, conceding the claim of the complainant and his associates to exemption from State taxes on their leaseholds to be well founded, they can have relief by injunction in a court of equity ? In The Exchange Bank of Columbus v. Hines, 3 Ohio St. Rep. 1, which was a proceeding to enjoin the collection of a tax alleged to be illegally assessed, it was held by a majority of the court — Ranney, J., dissenting on this point — that relief could not be had in this form, on the ground that a full and adequate remedy was afforded by action at law against the officer who might distrain for the collection of the tax. That, however, was the case of a single party seeking relief for himself alone. And it seems to be well settled, that “ where one person claims or defends a right against many; or where many claim or defend a right against one,” courts of equity will interpose in order to prevent multiplicity of suits. 2 Waterman’s Eden on Injunctions 416, et seq. Holding, then, as we do, that the complainant, and those for whom he sues, aro entitled to a remedy by injunction, if they are entitled to any, we are brought at once to the main questions in the case : does the legislation of our State incorporating the Ohio University, and granting to it the lands originally received from the United States, in trust for the support of such an institution, taken in connection with the lease of such lands at a fixed rent to the complainant and his associates in pursuance of that legislation, constitute a contract ? — and, if so, does the subsequent legislation of the State impair the obligation of that contract ? If it does; then, under the tenth section of the first article of the constitution of the United States, which declares that “ no State shall pass any law impairing the obligation of contracts ” — which constitution we have sworn to support, and which Ohio, when she sought to be and was admitted into the Union under it, accepted —that subsequent legislation is pro tanto null and void, and the threatened acts of the defendant for the collection of the tax assessed, would be a wrong against which he ought to be enjoined ; if not, not.

In the consideration of these questions, from the course of recent decisions in this State, and the reasonings on which they are based, we are met at the threshold by the inquiry, is the legislature of a State capable of contracting ? In so far as the legislature is the representative of the sovereignty of a State, it surely is; for the capacity to contract is one of the essential attributes of sovereignty. When the congress of 1776 declared the independence of the United States, they proclaimed that “ as free and independent States, they had full power to conclude peace, contract alliances,” “ and to do all other acts and things which free and independent States may of right do.” To say authoritatively that a State has not power to contract, is to doom her to the incapacities of perpetual minority, indissoluble coverture, or endless lunacy. But, it is said, the constitution of 1802 nowhere grants to the legislature the power to contract. It does not expressly, neither does it to the executive or judicial, the only remaining departments between which the powers of government are distributed. It will not be contended, we presume, that the executive, under that constitution, had any power to contract, aside from legislative authority, nor that he or any other executive officer of the State would be at liberty to refuse to contract in behalf of the State when thereunto specially enjoined by legislative act, unless restrained by some constitutional prohibition. Indeed, in the case of Plank Road Company v. Husted, 3 Ohio St. Rep. 582-3, which seems to deny to the legislature, under the constitution of 1802, the capacity to contract for the ' exemption of any property within the State from taxation for any greater length of time than until a subsequent legislature shall see proper to repeal the act stipulating for, and pledging the faith of the State for the exemption, it is admitted that “ contracts to which the State is a party, are usually made under the authority of some existing law ” (legislative act), “ and in conformity to its directions.” Now, contracts are no contracts unless they are binding on the parties to them. If they may be made under the authority of legislative acts, then legislative acts may authorize them. And if the familiar legal maxim be true, that whatsoever a party does by or through the medium of another, as his agent, he does himself, it follows as an inevitable logical necessity that whatsoever a party may of right do by an agent indirectly, he may himself do directly. If, therefore, a legislature may authorize and enjoin the making of a contract by an agent acting solely under and by virtue of its authority, it may itself make the same contract by its own act, without the intervention of an agent.

But it is said the making of contracts is inconsistent in its nature with the functions of legislation, i. e., law-making. This, we respectfully submit, is sacrificing fact to theory, and the substance of things to metaphysical distinctions. That, as a matter of fact, legislatures have made contracts, and have religiously kept them, is susceptible of proof from familiar history; that they have made them and attempted to break them, the case before us is a deplorable, but by no means a solitary, instance.

The doctrine that legislatures have no capacity to contract, is a novelty in the jurisprudence of Ohio. So far as we know, it was unheard of during the first half century of her existence as a State. Certain it is that the power and legal capacity of the State, through her legislature, to contract, and the binding obligation of contracts thus made, subsequent repugnant legislation to the contrary notwithstanding, was fully recognized and asserted in the year 1835 by the supreme court in bank, in State of Ohio v. Commercial Bank of Cincinnati, 7 Ohio Rep. 125. The same doctrine was recognized and affirmed in Fletcher v. Peck, 6 Cranch 127, in the year 1810; in New Jersey v. Wilson, 7 Cranch 164, in the year 1812 ; and so on in an unbroken current of decisions by the Supreme Court of the United States down to the recent cases of the State Bank of Ohio v. Knoop, 16 Howard 369, and Ohio Life Insurance and Trust Co. v. Debolt, 16 Howard 416. So also in Hardy v. The Inhabitants of Waltham, 7 Pick. 108. In Ohio Life Insurance and Trust Co. v. Debolt, above referred to, Chief Justice Taney, concurring with the majority of the court in its judgment, which denied to the plaintiff an exemption from taxes which it claimed, on the ground that there had been no contract for such exemption by the State, distinctly admits the competency of the legislature to contract for such exemption; and this on the ground that the power thus to contract is an attribute of State sovereignty never surrendered to the United States, or prohibited to the State by either the State or federal constitutions. He says: “ 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 on 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 States as well as individuals; and franchises, immunities and exemption 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 of the constitution of the United States, and over which this court has no control. Eor 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.

“ This power may be indiscreetly and injudiciously exercised. * * * 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.

“ This doctrine was recognized in the case of Billings v. The Providence Bank, and again in the case of The Charles River Bridge Company. 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 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 Howard 133, been directly reaffirmed.”

But, it is argued, if a State can bind herself by contract to an exemption of a portion of the property within her limits, and belonging to her citizens, from taxation, the power of taxation being an attribute of sovereignty, she thereby surrenders a portion of her sovereignty, which, in the nature of things, she can not do. Now, this argument overlooks the fact, that the power to contract is also an attribute of sovereignty; without which a State, so far from being a sovereign, would be on a level of legal incapacity with the minor and the lunatic. This,"! respectfully submit, is the legitimate result of the argument, unless indeed it be (which we will not presume) a flagitious attempt to exonerate a State from the eternal law of right — a law which attaches to Omnipotence Himself, the law of good faith, of justice and of truth. And to say that a State can bind herself by contract, and yet be at liberty to break it, is a solecism — obligation being a necessary and inseparable incident to every contract. For a State to bind herself by contract not to tax certain property, then, is not a surrender or abridgment of any portion of her sovereignty ; it is simply the exercise of another attribute of sovereignty. But I deny that a State may not surrender a portion of her sovereignty. For a good and sufficient consideration, States may do it; States have done it; and the whole line of history is dotted with examples of such surrender. Great Britain surrendered her sovereignty over this vast empire; France hers over Louisiana; and Mexico hers over California. They surrendered not only the power of taxation, but every other sovereign power over vast territories. Ohio, in this case, for a good consideration “ to her in hand paid,” abdicates the right to tax two townships of land.

Again, it is said that if the State may, by contract, exempt one species or one amount of property from taxation, it may another, and another, and so on, until it is deprived of resources, and thus rendered inadequate to the performance of its proper functions. That such a catastrophe is, in imagination, supposable, is readily admitted. The power to contract may be abused. But then this very power of taxation, the ethereal inviolability of which is so strenuously contended for, is liable to similar abuse, and to the same ruinous extent. It is a fallacy, therefore, to infer the non-existence of a power merely because its exercise may, by theoretical possibility, be pushed to a suicidal extreme. The sovereign power of taxation, and the sovereign power to contract, are both necessary to the proper discharge of the functions of government; but both are liable to abuse. All governmental powers are capable of abuse. No frame of political institutions can afford perfect guarantees; and our final reliance must be on the instincts of self-interest and self-preservation, inherent in governments as well as in individuals, and in the provident intelligence of the people, rather than in the judicial declaration of supposed incapacities.

In attempts which have been made to vindicate the recent legislation of the State bearing on the subject of contracts like that we are now considering, it has been assumed that the legislature could not by contract bind the State permanently to exempt any given property from taxation; and it is thence argued' that this incapacity must have been understood by those who at any time may have contracted with the State; that they therefore contracted in full view of this supposed incapacity — in full view of the impliedly reserved right of any subsequent legislature to annul what its predecessors had done; and that thus the reserved right in one of the parties to alter or annul the contract at pleasure, became and was a part and parcel of the contract itself. Now, this argument is grounded on a subtlety which has never been recognized by the legal profession of our country, and was unknown to the jurisprudence of Ohio for the first half century of its existence ; and it seems to us that it would be monstrous to apply it now to those lessees who, from the nature and circumstances of their engagements with the State, it is evident, must have been poor, laborious and unlearned. It would be monstrous to conclude them by holding that they acted in full view of all the contingencies involved in a subtle process of reasoning unknown alike to the profession and courts of the State. Why, look at the argument! It makes words used in stipulations on the part of the State, mean something wholly different from their ordinary acceptation, and wholly different from what the same words mean when employed to express the engagements of the party contracting with the State. In the mouth of the lessee, forever means always. In the mouth of the State it means just so long as I please, and no longer. Indeed, we have no right to go back and suppose that the parties understood something beside that which appears on the face of their contract; it is but rational and just to suppose that both parties understood their words to mean just what they said, and that, under the superincumbent and inexorable prohibitions of the constitution of the United States, they were mutually bound to their exact, faithful and perpetual fulfillment. The contrary argument is redolent with the odor of repudiation; is rife with the very mischief which it was the special design of the tenth section of the first article of the constitution of the United States to prevent; is condemned by the morality of the world, and can find, we trust, no durable resting place in courts of justice.

Again, this recent legislation is attempted to be justified by an argument drawn in some way — we confess to us not very intelligible — from the fact that, since the making of the contract set forth in the bill, the State has effected a peaceable revolution; or in other words, changed its constitution, and that the statutes complained of are in conformity to the express requirements of that constitution. Now, granting, for the sake of the argument, that the facts are as claimed; let us inquire : Does a change of constitution annul contracts ? Does a revolution, whether peaceful or violent, justify or excuse repudiation ? Certainly not. Were the United States less bound for the faithful payment of their debts, contracted 'to the government of France and the bankers of Amsterdam during the war of the revolution, on account of the substitution of the present constitution of the United States, for the old articles of confederation ? Has France any more or better right to resume the, power of taxation, or any other sovereign power over Louisiana, in the face of her solemn contract to the contrary, from the fact that her brilliant but volatile people have, since that time, seen proper to change her constitution with every changing moon ? If she were to attempt it, the law of nations — the code of international morality, sanctioned and enforced by the general conscience of Christendom — would denounce the just penalty of war against her. And is the obligation of a contract less sacred, because one of the parties to it is an humble individual, incapable of vindicating himself with a strong hand ? In the case before us, no penalty accrues, no war results ; and yet injustice is allowed. The constitution of the United States interposes its potent veto, avoids the very act of repudiation, and leaves the obligations of the contract unimpaired.

To frame a new State constitution is but to “ pass a law ” — a law more formal and solemn in the mode of its enactment, to be sure,, and passing under the more direct supervision of the constituent body, the people — but still a law, and like any other law, subject to the supremacy of the constitution of the United States, and a nullity when in conflict with the provisions of that instrument.

By the constitution of 1802, it is enjoined on the legislature “ forever to encourage by legislative provision, schools and the means of instruction.” No such duty is by that constitution enjoined on the legislature in respect to internal navigation and the facilities of transportation. Yet the legislature under that constitution did inaugurate and prosecute the policy of constructing canals radiating into almost every quarter of the State. In so doing, it contracted an,enormous debt, the burthens of which are now not only known, but felt. Having no other assured resource for the discharge of this debt but that of taxation, it thereby, in effect, virtually bound itself to tax its people perpetually until this debt should be finally paid. This obligation has ever been scrupulously observed. The first dawnings of a desire to repudiate it were at once and forever frowned out of countenance. All recognize — no one disputes — the obligation.

Now, if a State may by contract bind herself to tax for the promotion of a policy not of constitutional obligation, may she not in like manner bind herself not to tax for the promotion of a policy which is of constitutional obligation ?

Here, then, were parties competent to contract; for no one will question the competency in this respect of the complainant and those for whom he sues. Did these parties agree ? did their minds meet ? What are the facts ? The State opens the negotiation, and, speaking through her legislative act, makes her proposition to the complainant and his associates to this effect: If you will lease these lands at a fixed rent, payable to the Ohio University, for ninety-nine years, your lands thus leased shall be perpetually exempt from all State taxes. This is the proposition of the State. The complainant and his associates lease the lands accordingly ; they bind themselves to pay,-have paid, and must continue to pay, a fixed rent accordingly; a rent fixed, as a matter of course, at a considerably higher rate than they would have been willing to pay had it not been for the proposed exemption. Relying on the faith of the State for the fulfillment by her of a contract based on her own proposition, they take leases; and thus accept the proposition of the State pure and simple, without modification ; and thus the minds of the parties have met. They have respectively agreed to do particular things, and not to do other particular things.

Was there a good and valid consideration ? To promote and secure the instruction of her youth, may properly be said to have been the primeval, as it is the fundamental and favorite policy of Ohio. This policy originated with the congress of the old confederation, is indicated in the resolutions of that body authorizing the first sale of lands within the limits of our State to the Ohio Company of Associates, and was provided for in the contract of sale between the board of treasury and the agents of that company, while the State was still in embryo. In the constitution of 1802, the first organic law of the State, it is declared that “ religion, morality, and knowledge, being essentially necessary to good government and the happiness of mankind, schools and the means of instruction shall forever be encouraged by legislative provision, not inconsistent with the rights of conscience.” Our present constitution declares that “ the general assembly shall make such provision, by taxation or otherwise, as * * will secure a thorough and efficient system of common schools throughout the State.” And this very year the State is levying a tax for educational purposes alone, amounting in the aggregate to not less than one million two hundred thousand dollars.

In the payment by these lessees, then, of a larger rent, in faith of the promised exemption, than they otherwise would have been willing to pay, to be paid to the Ohio University, the trustee of the State, and the creature of her legislation, in trust for the promotion of her wise and favorite policy, we find an adequate and valuable consideration for the exemption proposed by the State, and accepted as a material part of the contract by the lessees.

Here, then, we have parties competent to contract; a meeting of minds, and mutual agreements to do and not to do particular things; and finally a good and valid consideration ; and thus there is filled, in every particular, the legal definition of a binding contract.

Contracts stipulating for exemptions of this kind are not favored in law, and will never be presumed. Charles River Bridge v. Warren Bridge, 11 Peters 420 ; Taney, C. J., in Ohio Life Ins. & Trust Co. v. Debolt, 16 How. 435. And, as an individual member of this court, and speaking for myself alone, I am free to say that I am very far from being friendly to the policy of such exemptions, and am gratified that our present constitution has effectually prohibited the grant of them in future. Rut the question of constitutional and legislative policy is one thing, and the questions of law and fact now before us are other and very different things. That here was a contract perfect in all its requisites, is clear ; the language and conduct of the parties is unequivocal, admits of but one interpretation, and leaves no room for presumptions.

Is the recent legislation of the State such as to impair the obligation of this contract ? The question, unfortunately, can have bub one answer. It has attempted to tax lands which it had solemnly contracted never to tax. - Perhaps we ought to presume— and we should certainly be very glad to be able to presume — that this recent legislation complained of was the result of oversight. But — and we feel neither pride nor pleasure in saying it — the language of that legislation seems to be too explicit, and too direct in its application to these lands, to admit of so charitable a presumption. •

An argument has been attempted to be drawn in justification of these acts of seeming repudiation, from supposed analogies between the right of taxation and the right of eminent domain. But there aré no such analogies ; and if there were, they would not apply to the case before us. The right of eminent domain rests on the basis of supposed imperious necessity, and is inseparabie from an obligation resting on the State to make compensation for the property appropriated under it. Woodbury, J., in West River Bridge v. Bix, 6 Howard 545. If the right of taxation and the right of eminent domain mre analogous, then their incidents ought to be analogous ; and it will hardly be contended that the right of taxation rests on any such basis, or involves any such incident. At all events, here is no pretense of necessity, and no provision for compensation. Indeed, the idea of compensation to the individual for taxes exacted, is an absurdity; as all motive for the tax itself would thereby cease. It is enough, however, for us to be clear that the legislation complained of is in contravention of the constitution of the United States, and being so, is therefore null and void. In justice to my own estimate of the character of our people, I will take the liberty to say, I am satisfied that their “ sober second thought ” will never sanction that legislation; and that, could the question be brought fairly and fully before them, they would, without reference to the provisions of the federal constitution, recoil from such a seeming manifestation of Carthagenian faith, with the same abhorrence as that which animated the framers of the constitutional prohibition we are called on to apply.

Syllabus of the leading points in the dissenting opinion, as noted, by the Chief Justice:

According to the interpretation of the clause in the tenth section of the first article of the constitution of the United States, prohibiting any State from passing any law impairing the obligation of contracts, by Chief Justice Marshall, the term contract, as used in the constitution, was never intended to extend to the civil relations of persons, or to restrain the legislation of the States in regard to their civil institutions.

In passing upon the grave questions involved in this case, and in the exercise of the high functions to which official duty compels us, we have not been insensible of the delicacy and responsibility of our position. But we have sworn to support the constitution of the United States ; and, so far as depends on us, its guaranties must be upheld and the faith of contracts preserved inviolate.

Decree for complainant, and those for ivhom he sues.

Bartley, C. J., dissented.

The franchise of a corporation is not private property, and cannot be made the subject malta• of contract within the meaning of the above mentioned clause of the constitution.

A legislative exemption from taxation in the charter of a corporation, cannot be construed to be a contract within the meaning of this constitutional prohibition.

The poioer of taxation, and the power of amending and repealing existing laws, are essential functions of the sovereign authority of the State, a surrender or abridgment of which cannot be made the subject matter of contract.

The delegated legislative power of the State, including the power of taxation, as well as the p'ower of altering and repealing existing laws, must remain perfect and complete in the General Assembly as a continuing body at every session. And one legislature cannot, by the authority of the constitution, in the enactment of laws, provide by contract against their amendment or repeal by a subsequent legislature.

Every statute being subject to the implied and inherent condition of its liability to alteration and repeal, if a statute, conferring the franchise of a corporation, could constitute^ contract, within the meaning of the constitutional prohibition, such contract would be subject to the implied and unavoidable condition that it might be altered or repealed, in the exercise of the legislative power.

By the adoption of the new constitution, the people of this State, in the exercise of their original sovereignty, resumed the power of taxation (if it had been, to any extent, impaired by legislative relinquishment), by the express provision in the constitution, requiring taxation to be by an equal and uniform rule on all property in the State.

Where lands are donated by the government, and the legal title vested in an incorporated institution of learning for the purpose of endowing it, and authority is given to the corporation to lease the lands on a specified or fixed rent, and to require, at discretion, an additional yearly rent not exceeding the amount of taxes which the Slate imposes on property of like description, a provision in the law incorporating the institution exempting the lands, “ as appropriated and vested in the corporation, from all State taxes,” is a simple exemption of the interest of the institution in the lands from taxation, and not that of the lessees of the lands; and by no known rule of interpretation can such an exemptionjereate any privily of contract, between the State and the lessees, for a surrender of the power of taxation.

Note by the Chief Justice. — Since the announcement of the decision in this case, I have been favored with a copy of the opinion of the supreme court of Pennsylvania, in the case of Henry S. Mott et al. Canal Commissioners v. The Pennsylvania Railroad Company et al., just decided, in which that court has, by a unanimous decision, fully sustained the doctrine of the foregoing dissenting opinion, and also repudiated the doctrine of the power of the Supreme Court of the United States to reverse the judgment of a State court, on the matter of the construction of a statute, or of the constitution of the State. And Chief Justice Lewis, in a very able opinion, pronouncing the judgment of the court, makes the following remarks, which I deem worthy of special note here :

“ In general, the State courts have avoided expressing an opinion on this momentous question, where the necessities of the case did not require it. The cases which have arisen, have generally been disposed of by holding that, ‘exemptions are binding until repealed by subsequent legislation;’ that ‘no charter or grant carries with it such exemption unless clearly expressed;’ that ‘the taxing power is of vital importance, and is essential to the existence of government;’ that it is ‘a part of the power of legislation;’ that ‘it resides in a government asa part of itself;’ and that ‘the release of it is never tobe assumed-’ Most of these principles are announced by Chief Justice Marshall in the Providence Bank v. Billings, 4 Pet. 561, 562, 563, and recognized by many decisions in this and other States. 10 Barr. 442; 12 Harris 232; 10 Harris 496. But the question has been distinctly decided against the existence of any such power, five different times, by the unanimous judgment of all the judges Of the Supreme Court of Ohio. Debolt v. The Ohio Life Ins. and Trust Company, 1 Ohio St. Rep. 563; The Toledo Bank v. The City of Toledo, Ib. 623 ; Mechanics’ and Traders’ Branch Bank v. Debolt, Ib. 591; The Milan and Rushland Plank Road Company v. Husted, 3 Ohio St. Rep. 578; The Norwalk Plank Road Company v. Rusted, 3 Ohio St. Rep. 586. In one of these cases, it was declared that the legislature had not the constitutional authority to abridge or in any manner whatever surrender any portion of the right of taxation, and that this question had been settled by solemn adjudication, and is not now an open question in that State. 3 Ohio St. Rep. 581. It is true, that the Supreme Court of the United States has taken a different view of the question, and has, in several cases, reversed the decisions of the Supreme Court of Ohio. Piqua Bank v. Knoop, 16 How. 369 ; Mechanics’ and Traders’ Bank v. Debolt, 18 How. 380; Mechanics’ and Traders’ Bank v. Thomas, Ib. 384; Dodge v. Woolsy, Ib. 331.

“ The decision of the Supreme Court of the United States, on the construction of the constitution or laws of the United States, are binding on the State courts. The decisions of the supreme courts of the several States, on the construction of the constitution and laws of their respective States, are, in like manner, binding on the Supreme Court of the United States. That court has no more right to overrule a judgment of a State court, on a question of State law, than the State court has to overrule the United States court on a question of United States law. All contracts are to be construed and understood according to the law of the place where they are made and to be performed. The laws and constitution of a State are to be construed and understood everywhere according to the judicial construction which they receive in the State where they are made and are to operate. This is the rule of jurisprudence which prevails universally throughout the civilized world. It is the rule which always ought to govern, and which generally does govern the Supreme Court of the United States. Wherever there is a departure from it, the necessary result is to impair public confidence in that exalted tribunal, and to introduce disastrous confusion into the administration of the law. It cannot be expected that the judges of the federal court should be as familiar with the constitution, laws and usages of Ohio, as the supreme judges of that State, who reside within her limits — who have been chosen on account of their acquaintance with her laws, and whose especialhusiness it is to expound them. The decision of the highest j udicial tribunal in a State, on the construction of the State Constitution, or a State law, is authoritative everywhere, when the same question arises, because it is pronounced by the only tribunal having direct and immediate jurisdiction over the question. The decision of the United States court on the same point, where it incidentally arises, is not authority elsewhere, because it has no direct and immediate jurisdiction over the question. Its duty is to receive the State law as it is expounded in the tribunal of the last resort in the State. These views furnish a plain rule for estimating the value of the conflicting decisions which have been cited. We have no hesitation in adopting the decisions of the State courts, on ail questions respecting the meaning of their own State constitutions, and extent of the powers which the people of the States have therein granted to the different departments of their own State governments. It may be added, that the United States court was divided in opinion on this question. Three eminent judges of that court dissenting, while the State court was unanimous. And it is but just to say, that the opinion of the State court is sustained by a course of argument which has never been satisfactorily answered in the United States courts, or elsewhere.”

Bartley, C. J.,

dissenting:

The intrinsic importance of the principle involved in the decision just announced, and its effect upon the law as settled by-repeated adjudications of this court, from an early period after its organization, forbid that I should withhold a full and explicit statement of my solemn convictions touching the grounds of my dissent, with the reasons upon which they are based. The decisión involves a grave constitutional question which touches the foundation of all civil authority, and rises far above any consideration of mere temporary interests, or immediate bearings in this case. It announces a principle, which creates perpetuities in exemptions from the equal burdens of taxation, which may extend not only to millions, but hundreds of millions of dollars worth of property, and gives to those perpetuities not only a permanency paramount to the constitution of the State, but a superiority over the prerogative of the sovereignty of the people.

The question of the policy of the State to foster institutions of learning, and to encourage the cause of education, is not in controversy. That is a matter about which we would not probably differ.

It is contended on the part of the plaintiff, that the provision of the tax law of 1852, imposing a State tax on the lands of the Ohio University at Athens, is unconstitutional and void, so far as it affects the provision of a prior statute exempting the lands of the university from thé payment of any State tax, by virtue of the prohibitory clause of the 10th section of the first article of the constitution of the United States, which declares that “no State shall pass any law impairing the obligations of contracts.” I propose to consider the question in two points of view.

I. I maintain that the circumstances of the case presented by the plaintiffs, do not constitute a contract within the operation of this prohibitory clause of the constitution.

II. If it be conceded, even for the sake of the argument, that such a contract does exist, the provision of the tax law does not violate its terms or impair its obligations.

I will consider these in their order.

I. That which is set up as constituting the contract, the obligation of which is alleged to have been interfered with, consists of a statutory provision exempting the lands of the university from the payment of any State tax. The circumstances connected with the legislative exemption are as follows : In the year 1792, the United States, in the grant of the lands purchased hy the Ohio land company, reserved, within the territory granted, two townships of land for the purpose of endowing a university ; and by resolution of congress, the legislature of Ohio was entrusted with the application of the fund to the purposes of the donation. In 1804, the legislature passed an act incorporating the Ohio University, in the town of Athens, and vesting the lands of the two reserved townships, in the corporation, in trust for the use and support of the university. The same statute provided for a valuation of the lands in their original and unimproved state, and authorized the corporation to lease the same for the term of ninety-nine years, renewable forever, on the yearly rent of six per centum on the amount of the valuation. Provision was also made for a re-valuation at the expiration of thirty-five years, and another at the expiration of sixty years from the commencement of the term of each lease, to be made on the principle of the first valuation ; and for the payment of a rent of six per centum per annum on the re-valuation. And besides the fixed rent, a provision was made as follows:

“ Provided, always, that the said corporation shall have power to demand a further yearly rent on said lands and tenements, not-exceeding the amount of the tax imposed on property of like description by the State.”

It was also further provided, in the same act, “ that the lands in the two townships appropriated and vested as aforesaid, with the buildings which are or may be erected thereon, shall forever be exempted from all State taxes.”

Now, the suit before us is brought, not by the university, to enforce any contract-arrangement between the corporation and . the State, but by the plaintiff, in behalf of himself and others, as the lessees of the university lands. And it is not pretended by the plaintiff, that the lease or instrument executed between the corporation and the lessee, as evidence of the lease-hold estate, contains any express condition or stipulation that the land shall be exempt from State taxes. But it is claimed that the legislative exemption, just recited from the act of 1804, constitutes a contract on the part of the State, that the lands donated to the university, should be forever exempt from the payment of any State tax in the hands of the lessees. And the real question presented, is, whether this legislative enactment is to be regarded as a law prescribing a rule in relation to taxation, or a contract stipulating against the imposition of a State tax on the lease-hold interest of the lessees — a legislative command, or a contract between the State and the lessees.

A law is a rule of action prescribed by the supreme power of the State, enacted in view of the overruling considerations of the public interests. A contract is an engagement entered into between two competent parties, in relation to something which is a competent subject matter of contract, upon a mutual legal consideration, and with a mutuality of obligation. If this provision of the law be a contract, who are the parties to it ? The provision is an immunity conferred on the university, with a view to its benefit. The corporation is the beneficiary of the donation. The relation of donor and donee was between the United States and the university. The State legislature was used as an instrumentality in vesting the donation in the university. The legal title to the land was vested in the corporation, and the authority of disposing of the land by lease belonged to the corporation alone. The contract creating the relation of lessor and lessee, was a contract to which the corporation and the lessee were the parties. The State was not a party to the lease. The lessee obtained his lease by an express written contract with the university, and not by any contract or negotiation with the State, or any grant made by the State to him. There was no privity of contract between the State and the lessee. He neither paid, nor agreed to pay, anything to the State. The consideration for the lease was the obligation of the lessee to pay to the corporation the specified rent. If, by the legislative act, a proposition on the part of the State was made to any person, it was to the corporators or corporation, and not to the lessees. The grant of the corporate franchise was to the corporators, and that of the donation of the lands was to the corporation. The corpora-tors accepted the franchise, and the corporation accepted the lands on the terms of the donation. It was the corporation, and not the State, that made the proposition to the lessees ; and they accepted their leases from the corporation as the lessor, and not from the State. Suppose a breach of the contract on the part of a lessee ; could the State have any remedy by suit on the contract ? What would be the form of the remedy ? and what the form of the relief ? The liability of a lessee for a breach of his contract, would be manifestly to the corporation, and not to the State. The idea, therefore, that the legislative exemption from taxation, constituted a contract between the State and each lessee, appears to me to be wholly inconsistent with the facts, and simply preposterous.

True it is, the contract between the corporation and the lessee was made in view of the provisions of the law authorizing the contract, and in one sense may be said to comprehend its terms. All contracts are held to be made in contemplation of the existing laws relating to their subject matter. And the proposition that whenever the State has, by legislative enactment, made regulations in relation to any particular subject matter, that the State, by means thereof, becomes a party to every contract between individuals, or private persons, in regard to such subject matter, would hardly be seriously claimed by any one.

If the exemption of the lands from taxation constituted a condition or stipulation on the part of the corporation, in the contract on which the lease was taken, and as a consideration, or part consideration for the undertaking of the lessee, it would be binding on the corporation as such, and for any breach of it, the corporation would be responsible to the lessee. As such, it would have the effect of a stipulation on the part of the corporation to keep the lessee clear of any assessment of State taxes upon the lands leased, and in case of the repeal of the exemption, and the assessment of the tax, the lessee might enforce the contract against the corporation by way of indemnity, and require a pro tanto reduction on the annual rent, which the corporation had a right, under the contract, to collect. The obligations of the contracts, therefore, between the corporation and the lessees, would not have been impaired, for they might have been enforced by the lessees against the corporation.

The exemption provided by the statute is either simply a rule m regard to taxation, or it is a contract between the State and the corporation. If it be a simple statutory regulation in regard to taxation, it was liable to repeal by any future legislature, and, therefore, did not authorize the corporation to contract with the lessees, that they should be forever exempt frpm this tax. And had the corporation made a special stipulation with the lessees for a perpetual exemption of the lands from taxation, without authority to do so, it clearly could not have bound the State. The legislature, however, in the same statute which provided for the exemption, exercised a prudent foresight as to a future change of policy in this regard, by providing, “ always,” as a condition on which the lands might be leased, “ that the corporation should have poiver to demand a further yearly rent on said lands and tenements, not exceeding the amount of the tax imposed on property of like description by the State.” Why this provision allowing the corporation to exact a further rent, in addition to the six per cent, on the valuation of the lands ? And why is the amount of the tax, which the State might from year to year assess on property of the same kind, made the standard or limit for this additional tax ? It manifests the clear intention of the law to be, that the exemption from taxation should enure to the benefit of the university, instead of that of the lessees. This provision authorizing the university to require a further and additional annual rent, is in the same law with the provision exempting the lands from taxation ; and each must be construed with reference to the other, and the one, as much as the other, was embraced in the terms and conditions of the lease. If, by the terms of the lease, the lands were exempt from State taxes, by the very same terms they w'ere liable to an additional rent equal to the tax, which additional rent the university was always at liberty to require. So that, as to the interest of the lessee, it could make no kind of difference whether the university should require this additional rent, or the State should require of him the payment of the tax, being precisely the same in amount. And, whether the lessees paid the amount as a State tax, or as an additional rent, could make no difference as to the interest of the lessee, except as a mere matter of form. And, if the State should in future tax these lands as the property of the university, the corporation need not be deprived of any portion of the regular fixed rent of six per cent, on the lands, as it had the right to require of the lessees the additional rent equal to the tax. If the State should tax the lands as the property of the lessees instead of that of the university, and the university at the same time omit to require any of this additional rent, the lessees would not be required to pay on their lands a single cent more, than the express terms of the lease allowed to be exacted in the form of rent. If the university should require the additional rent, and the State at the same time require the lands to be taxed in the hands of the lessees, the latter, by the terms of the contract, could compel the university to make a pro tanto reduction on the rent, equal to the utmost extent of the additional rent. Wherein, then, is the lessee injured, and how is the obligation of his contract impaired ? It is not averred or pretended, on the part of the plaintiff in this case (the lessee), that he has been required to pay the additional rent, and also the State tax. If such were the ground of the complaint, his only remedy would be on his contract with the university, in which he could compel a reduction on the additional rent required of him. The exemption from taxation, here, could not' attach as an incident to the land. The most that can be claimed, is, that it is an immunity for the benefit of the university. And if it be in the nature of a contract at all, it can be such only as between the State and the university. This is manifest from the language of the exemption itself. The statute appropriates the lands, and vests them in the university ; and provides that the lands “ appropriated and vested as aforesaid ” shall be exempted, etc. The exemption applies to the lands as the property of the university alone. It is the university, and not the lessees, which is entitled to the benefit of the exemption.

With all proper deference for the opinion of the majority of the court, therefore, I must be permitted to say, that, by the plain interpretation of the law, its true intent is, to my mind, so manifest as to be without doubt or difficulty. As the federal government had made this liberal donation of lands, to aid the cause of education, the legislature desired, by an act of munificence on the part of the State, to aid the institution of learning, by an exemption from the burden of State taxation. And the language of perpetuity used in making this legislative exemption, in the act of 1804, manifests the desire of that legislature, that the exemption should not be repealed by a future legislature. And, to effectuate this intention as far as practicable, and secure this immunity to the university, the provision was inserted authorizing the corporation to require the further and additional rent limited to the amount of the tax; so that, in case the State should in future impose a tax upon the interest of the university in the lands, the corporation could protect itself by requiring an additional rent from the lessees, equal to the amount of the tax. And, in case the State should impose the tax on the lessees, and they should come back on the university for a pro tanto reduction on .the fixed rent, the corporation had full protection against the burden, by requiring of the lessees the additional rent equal to the amount of the tax. Thus, if the policy of the State should be changed, and the tax be imposed by some future legislature, the burden would fall on the lessees, and not on the institution of learning. This is the only rational explanation of the fact, that the additional rent authorized is limited to the shifting and variable rule of a State tax.

But it is said that the plaintiff, and the others on whose behalf he sues, are' “poor, laborious, and unlearned,” and weight is given to this circumstance in giving an interpretation of the statute. It is not averred in the petition, nor does it appear in the proof, that the lessees are such. If, however, from the relation of lessor and lessee, the court is bound to act on the assumption that the lessees are not only “ poor and laborious,” but also “ unlearned ” men, does it follow that the great maxim of the law, matured and sanctioned by the wisdom of ages — “ Ignorantia juris, quod quisque scire tenetur, neminem excusat,” is to be set aside •? Is the determination of a grave legal question, in the court of dernier resort, to be affected by the consideration of a party’s condition in life, habits of industry, or degree of intelligence ? By what standard shall the degree of a man’s poverty, intelligence, or habits of industry be tested, in determining his rights, or giving effect to his contracts ?

I humbly conceive, that there is but little actual necessity for invoking the aid of sympathy in behalf of the lessees of the Ohio University lands, in the interpretation of a statute ; for the tendency of the legislation of the State brought under review in this cáse, is to show the fact that the lessees have been special objects of legislative favor. Besides the statute of 1826 in relation to the surrender of leases, and numerous other acts passed for the benefit of the lessees ; when an attempt was made in 1841 to in-force the re-valuation provision in the contract of the leases, it was resisted by the lessees on the alleged ground that the condition of re-valuation had been abrogated by implication, in the amendatory statute of 1805, relating to this institution. The Supreme Court, however, otherwise determined in the case of McVey v. The Ohio University, 11 Ohio Rep. 134. After this, on the application of the lessees to the legislature, the statute of 1843 was enacted, releasing the lessees from the condition of revaluation, without the consent, and against the interest of the university.

The real question, however, in this case, and that which is mainly urged by the learned counsel on behalf of the plaintiff, is, whether the law incorporating the university and including the exemption from taxation, constitutes a contract between the State and the incorporation, within the operation of the tenth section of the first article of the constitution of the United States. And this question, narrowed down to the limits of this case, and stripped of all disguises in modes and forms of expression, is nothing more nor less than this: whether the sovereign power of taxation inherent in the people of the State, can be, and was in this instance abridged, or to any extent surrendered, by the legislative exemption from taxation in the charter of the university ; so as to be beyond not only the authority of the legislature to resume it at any future session, but also beyond the power of resumption or change in the people of the State themselves, in the exercise of their original authority of remodeling, reforming and reconstructing their institutions by the formation of a new constitution. It is not claimed that an ordinary statutory provision, exempting any specified property from taxation upon grounds of p