corporations are consolidated, under a state statute which has the effect of dissolving both of them and creating a new corporation, the charter of the new company may be subject to alteration or amendment by the legislature, although those of the old companies were not so liable.45

In granting a charter of incorporation, the state may reserve the right to repeal, alter, or amend it. And when this is done, the repeal or amendment of the charter is no impairment of the contract which it embodies, but is rather the enforcement of one of its terms. This power may be reserved in the particular charter itself; but it is equally effective if the state constitution or a statute, in force when the charter is granted, reserves to the legislature the right to revoke or modify it. In the latter case, the reservation becomes a part of the contract." But the exercise of this power must be reasonable, and must have relation to the original nature and scope of the charter. It cannot be employed as a means of forcing the corporation into enterprises not contemplated by the charter, nor to deprive the corporators of their property, nor to abridge the lawful rights of the stockholders.*7

46

Rights, privileges, or franchises granted to a corporation by its charter may be resumed by the state, when the exigencies of the public require it, under the power of eminent domain, upon the payment of due compensation.48

And notwithstanding the protection afforded to charter rights and privileges by the doctrine under consideration, a corporation, like any individual, is subject to regulation, by legislative authority, to the end that the use of its franchises or property may not endanger the public health, safety, or comfort, or be made the means of oppression or fraud. That is, it is subject to regulation

under the police power.

earlier chapter.**

This subject has been considered in an

45 Shields v. Ohio, 95 U. S. 319.

46 Chesapeake & O. Ry. Co. v. Miller, 114 U. S. 176, 5 Sup. Ct. 813; Stone

v. Wisconsin, 94 U. S. 181; Suydam v. Moore, 8 Barb. (N. Y.) 358.

47 New York & N. E. R. Co. v. Town of Bristol, 151 U. S. 556, 14 Sup. Ct. 437.

48 West River Bridge Co. v. Dix, 6 How. 507.

49 See ante, p. 334. And see Beer Co. v. Massachusetts, 97 U. S. 25; Munn

Charters of Municipal Corporations.

The charter of a municipal corporation is not a contract within the meaning of this clause of the constitution. It is a grant or delegation of governmental powers, for public purposes, to a subor dinate agency of government. All rights, powers, privileges, and franchises granted to such corporations are held subject to legisla tive modification or recall. And therefore a statute revoking or changing the public powers or rights of a municipality, altering its boundaries, or modifying its government, does not impair the obli gation of any contract.50 And on the same principle, legislative grants to municipal corporations, which do not pertain to the func tions of government, but to the convenience or business advantages of the community, are not protected from subsequent revocation by this constitutional provision, as they would be if granted to private persons or corporations. The charters of some of our most ancient cities were granted by the crown of Great Britain before the separation of the colonies. But this circumstance gives them no peculiar sanctity. They are as much under the control of the legislature of the state as are municipal charters granted by that legislature itself."1

EXEMPTION FROM TAXATION.

282. A legislative grant of exemption from taxation will constitute a contract with the grantee which cannot be impaired by subsequent legislative action.

283. But such a contract of exemption

(a) Must be made out by clear and unambiguous terms, and cannot be presumed; and

(b) Must be founded on a consideration moving to the public.

v. Illinois, 94 U. S. 113; New Orleans Gas-Light Co. v. Louisiana Light & Heat Producing & Manuf'g Co., 115 U. S. 650, 6 Sup. Ct. 252; Stone v. Farmers' Loan & Trust Co., 116 U. S. 307, 6 Sup. Ct. 334, 388, 1191.

50 Dartmouth College v. Woodward, 4 Wheat. 518; Crook v. People, 106 Ill. 237; Demarest v. Mayor, etc., of New York, 74 N. Y. 161; Philadelphia v. Fox, 64 Pa. St. 169; Town of Marietta v. Fearing, 4 Ohio, 427.

51 Demarest v. Mayor, etc., of New York, 74 N. Y. 161.

It is well settled that the legislature of a state may agree, by an explicit grant founded upon a consideration, to exempt specified property from taxation, either for a limited period or indefinitely, or that taxation of the property in question shall be had only on a certain basis, and not otherwise, or shall not exceed a certain rate; and, this will constitute a contract with the grantee which succeeding legislatures may not impair by imposing taxes contrary to the grant.52

But a contract to exempt property from taxation will never be presumed. On the contrary, the presumption is always strongly against the intention of the legislature to surrender this important power, or to restrict or limit it in any way. All doubts will be resolved against the exemption claimed. Nothing but the clearest and plainest terms, manifesting such an intention, will be sufficient to establish a contract relieving property from its due share of the public

burdens. (And furthermore, a grant of this special privilege must

be founded upon a consideration, such as the imposition of some further burden or public duty upon the recipient of the grant, or the payment of a bonus or commutation to the state, or the surrender of some right or franchise previously held. (If there is no such consideration, the grant of exemption is a mere act of grace or favor and is revocable at will. And if it appears that the exemption was made without any consideration moving to the public, as is usually the case with the exemption of the property of religious societies and charitable institutions, then there is nothing to prevent its repeal at any time, for there is no contract to stand in the way.55

will.)

52 New Jersey v. Wilson, 7 Cranch, 164; Pacific R. Co. v. Maguire, 20 Wall. 36; Northwestern University v. People, 99 U. S. 309; New Jersey v. Yard, 95 U. S. 104; Gordon v. Appeal Tax Court, 3 How. 133; Farrington v. Tennessee, 95 U. S. 679; Piqua Branch of Bank of Ohio v. Knoop, 16 How. 369; Wilmington R. Co. v. Reid, 13 Wall. 264; New Orleans v. Houston, 119 U. S. 265, 7 Sup. Ct. 198; Yazoo & M. V. R. Co. v. Thomas, 132 U. S. 174, 10 Sup. Ct. 68.

53 Gilman v. City of Sheboygan, 2 Black (U. S.) 510; Providence Bank v. Billings, 4 Pet. 514; Delaware Railroad Tax, 18 Wall. 206.

54 Rector, etc., of Christ Church v. Philadelphia Co., 24 How. 300; Home of the Friendless v. Rouse, 8 Wall. 430; Tucker v. Ferguson, 22 Wall. 527.

55 East Saginaw v. East Saginaw Salt Co., 13 Wall. 373; Home Ins. Co. v. City Council, 93 U. S. 116; In re Mayor, etc., of New York, 11 Johns. 77; Broadway Baptist Church v. McAtee, 8 Bush, 508.

LAWS AFFECTING REMEDIES ON CONTRACTS.

284. There is a distinction between the obligation of a contract and the remedy for its enforcement. Whatever pertains merely to the remedy may be changed or modified, at the discretion of the legislature, without impairing the obligation of the contract, provided the remedy be not wholly taken away nor so hampered or reduced in effectiveness as to render the contract practically incapable

of enforcement.

The remedy cannot be wholly abolished or denied to the parties. For to withdraw all legal means of enforcing a contract, or obtaining satisfaction for a breach of its terms, is to withdraw that sanction of the law which constitutes a part of the obligation of the contract. The state is bound to provide a remedy for such cases. But it is not of the obligation of the contract that the remedy shall remain the same as it was when the contract was made.56 But if the parties to a contract include in it, in express terms, the remedy to be sought upon its breach, or the means to be used for securing its performance, subsequent legislation changing the remedial process they have agreed upon is, as to them, inoperative. Thus, for example, where a deed of trust in the nature of a mortgage contains the agreement of the parties as to the time and manner of its foreclosure by public sale, it cannot be made subject to the provisions of a statute afterwards passed, regulating such sales, which makes material chan ges as to the method of foreclosure or the right of the parties thereunder.57 A statute taking away the right to use the process of garnishment, except in cases where the creditor will swear that the debt was for food or house rent, cannot be applied to debts contracted before its passage and where exemptions were waived.5

56 Gantly's Lessee v. Ewing, 3 How. 707; Antoni v. Greenhow, 107 U. S. 769, 2 Sup. Ct. 91. The exercise by the state of the power to repeal a grant of authority to its courts to audit claims against the state does not violate the obligation of contracts entered into by the state at a time when the power existed. Baltzer v. North Carolina, 161 U. S. 240, 16 Sup. Ct. 500.

57 International Bldg. & Loan Ass'n v. Hardy, 86 Tex. 610, 26 S. W. 497. 58 Adams v. Green, 100 Ala. 218, 14 South. 54.

But the repeal of a usury law, operating retrospectively upon co tracts previously made, and which, at the time, would have been voidable for usury, cannot be said to impair their obligation."9

Bankruptcy or insolvency laws may be passed by the states, authorizing the discharge of debtors from their obligations and liabili ties on just and reasonable terms. But these laws are subject to three important limitations. First, there must be no national bankrupt law in existence at the time, for such a law suspends all state laws on the same subject while it continues in force. Second, state laws of this kind cannot apply to citizens of other states having claims against the debtor, for the state has no jurisdiction over them. Third, such laws cannot apply to contracts entered into before their enactment, for that would impair their obligation.""

The legislature may enact new or different statutes of limitation, prescribing the period within which actions on contracts must be brought, and may make them applicable to existing contracts, provided the remedy of the creditor is not thereby taken away or unreasonably restricted. That is to say, a statute of limitations cutting off all remedy on a particular contract, by prescribing a period which, as to that contract, had already expired, would be unconstitutional. But if it leaves a reasonable time to the creditor to begin his proceedings, he cannot complain, although the time is less than it would have been if the former statute had remained in force."1

A law granting exemptions from execution where none before existed, or increasing the exemption already granted, may apply to the enforcement of contracts made before its enactment if the increase of the exemption is not unreasonable. But if it is so great as to make the creditor's remedy of no value, or seriously to impair his prospect

59 Ewell v. Daggs, 108 U. S. 143, 2 Sup. Ct. 408.

60 Ogden v. Saunders, 12 Wheat. 213; Baldwin v. Hale, 1 Wall. 223. These limitations on state insolvent laws constitute the difference between their effectiveness and that of an act of congress. And it cannot be doubted that if congress were restrained, as the states are, from passing laws impairing the obligation of contracts, the value to trade and commerce of a national bankrupt law would be almost minimized, for, in that case, it would be restricted, as state laws are, to future contracts.

61 Bell v. Morrison, 1 Pet. 351; Sturges v. Crowninshield, 4 Wheat. 122; Mitchell v. Clark, 110 U. S. 633, 4 Sup. Ct. 170, 312: Vance v. Vance, 108 U. S. 514, 2 Sup. Ct. 854; Osborn v. Jaines, 17 Wis. 573.