CONTRACTS.

Motives of limitation, sec 1061.

Invalidates state legislation impairing contracts between individuals, sec 1062.

Invalidates repeals by state legislatures of grants of franchises or of estates unless right of repeal is reserved, sec 1063.

Whether exclusive privileges are open to revision is a matter of public policy, sec 1064.

Charters subject to reservation, sec 1065.

Grants to municipal corporations may be revoked, sec 1066.

Laws modifying remedies are constitutional, sec 1067.

State discharges do not bind citizens of other states, sec 1068.

Marriage not within the limitation, sec 1069.

And so as to torts, sec 1070.

Tenure of public office may be modified by law, but not specific contracts, sec 1071.

Sec 1061

The tenth section of the first article of the constitution of the United States provides that "no state shall pass.any law impairing the obligation of contracts." The motives for the introduction of this clause, we learn from the debates and from contemporaneous exposition, were (1) the maintenance of the sanctity of contracts; (2) the preservation inviolable of inter state trade; and, (3) the vindication of the inherent right of contracting (and it is important to consider this in connection with recent legislation limiting the right) as a primary prerogative of freedom.2

Motives of limitation.

1 Supra, sec 325, 394.

2 In Gebhard V. R. R., 17 Blatch. 416, a Canada statute reducing the interest on the bonds issued by a Canada railroad corporation, was declared, so far as concerns parties not assenting to the reduction, to be void as "repugnant to the fundamental principles of justice." But see League V. De Young, 11 How.

185. That a state constitution is a "law" under the limitation, see Keith V. Clark, 97 U. S. 454; Lehigh Valley R. R. V. McFarlan, 31 N. J. Eq. 706; Hays V. Com., 82 Penn. St. 518. That a declaratory law overturning an accepted judicial construction of a prior law is void when invalidating a contract under such law, see Lamberton V. Hogan,.

Sec 1082

To take the limitation in its most obvious and general sense, it invalidates all state legislation which impairs contracts between individuals.1 Hence, legislation reducing interest on existing debts is unconstitutional.2 And so is legislation providing for the extinction of antecedent irredeemable ground rents.3

Sec 1063

The limitation, also, invalidates all repeals by state legislatures of grants of franchises or of estates, unless the right of repeal be reserved in the grant. Hence, a charter by a state legislature granting franchises to a college, without such a reservation, cannot be constitutionally repealed.4 Nor when a charter provides that the lands of a college shall not be taxed, can this provision be repealed.5 Bank charters, conveying certain banking privileges to the bank corporation, are so far within the limitation that those privileges cannot afterwards, by mere arbitrary legislative process, without due judicial action, be withdrawn.1 - A charter of a railroad corporation, also, cannot be repealed unless the power be reserved;2 although such corporation, when a common carrier, may, as we will hereafter see, be subject to limitation as such.3 It must be recollected, at the same time, that charters, being grants of power subtracted from the people as a body in favor of selected individuals, are to be construed strictly so as to pass no privileges which are not expressly given.4 An important distinction, also, is to be observed in this respect between grants of franchises by a state and a contract between individuals. A compact between individuals is from the nature of things ephemeral and tentative; the contracting parties soon die, and, at least in a generation, so far as they are concerned, the engagement ceases to operate. But grants of franchises from the state, if under the shelter of the limitation before us, are of perpetual continuance. No matter how great may be the change of surrounding circumstances, or how injurious these privileges may become to the community as a whole, they will continue to exist if so protected. Hence it becomes peculiarly important, in applying the limitation, to keep in mind the rule that when there are two equally probable constructions open to a grant of a charter by the sovereign, the construction which parts with the least portion of sovereignty is to be preferred.1

Invalidates state legislation impairing contract between individuals.

Invalidates all repeals by state legislatures of grants of franchises or of estates, unless the right of repeal is reserved in the grant.

2 Barr, 22; Reiser V. Savings Fund, 39 Penn. St. 137; Haley V. Phil. 68 Penn. St. 45.

1 Williams V. Bruffy, 96 U. S. 176; Murray V. Charleston, 96 U. S. 432; Edwards V. Kearzey, 96 U. S. 595; Memphis V. U. S., 97 U. S. 293; Reho-both V. Hunt, 1 Pick. 224; Hestonville R. R. V. Phila., 89 Penn. St. 210; Rock Hill College V. Jones, 47 Md. 1; Ratcliffe V. Anderson, 31 Grat. 105; see Williams V. Louisiana, 103 U. S. 637; Smith V. Cleveland, 17 Wis. 556.

2 Roberts V. Cocke, 28 Grat. 207; Cecil V. Deyerle, 28 Grat. 775; Pretlow V. Bailey, 29 Grat. 212; see, however, McAdoo V. Smith, 5 Baxt. 695. A bank in South Carolina suspended specie payments in NoV. 1860, and never after resumed, paying out its own bills for the last time in August, 1861, and after that date paying its debts only in confederate money. - It was held by a majority of the judges of the supreme court of the United States that an act of the legislature of South Carolina legalizing the suspension of specie payments was unconstitutional; that the legislature could do no more than relieve the banks from the forfeitures of their charters; but that it could not relieve them from the obligation to pay their debts in specie nor extend the time for such payments. Waite, C. J., Strong and Bradley, JJ., dissenting; Godfrey V. Terry, 97 U. S. 171. 3 Palairet's App., 67 Penn. St. 479.

4 Dartmouth College V. Woodward, 4 Wheat. 518; Vincennes UniV. V. Indiana, 14 How. 268; McGee V. Mathis, 4 Wall. 143; Grammar School V. Burt, 11 Vt. 632; Brown V. Hummel, 6 Barr, 86; University of North Carolina V. Foy, 1 Murph. 58.

5 Northwestern University V. People, 99 U. S. 309.

1 Gordon V. Tax Court, 3 How. 133; Planters' Bank V. Sharp, 6 How. 301; Curran V. Arkansas, 15 How. 304; People V. Manhattan Co., 9 Wend. 351; Bank of State V. Bank of Cape Fear, 13 Ired. 75. But see Mechanics' Bank V. Debolt, 1 Oh. St. 591; Knoup V. Piqua Bank, 1 Oh. St. 603, reversed in 16 How. 369. - By the charter of the Bank of Tennessee, granted by the legislature of that state in 1838, it was provided that the state should receive the notes of the hank in payment of taxes. By a constitutional amendment adopted in 1865, it was provided that the issues of the bank during the insurrectionary period were void, and their receipt for taxes was forbidden. It was held by a majority of the supreme court of the United States that the amendment was void as impairing the obligation of the contract embodied in the charter. Keith V. Clark, 97 U. S. 454.

2 Greenwood V. R. R., S. Ct. U. S. 1882, 25 Alb. L. J. 448.

3 That a franchise of a bridge or ferry company may be taken away, and either resumed or elsewhere distributed, upon compensation given, was held in West River Bridge V. Dix, 6 How. 507; White River Turnpike Co. V. R. R., 21 Vt. 590; Boston Water.

Power Co. V. R. R., 23 Pick. 360; Enfield Bridge Co. V. R. R., 17 Conn. 40, 451; Beekman V. R. R., 3 Paige, 45. That a promise by a legislature not to tax a particular franchise or property may be revoked was maintained in Piscataqua Bridge V. N. H. Bridge, 7 N. H. 69; Debolt V. Ins. Co., 1 Oh. St. 563; Knoup V. Piqua Bank, 1 Oh. St. 603; which, however, were reversed by the supreme court of the United States in Piqua Bank V. Knoup, 16 How. 369; and see Armington V. Barnet, 15 Vt. 751; Osborne V. Humphrey, 7 Conn. 335; State V. Hoboken, 43 N. J. L. 96. That where a charter exempts a corporation from taxation, taxation cannot subsequently be imposed, see Northwestern University V. People, 99 U. S. 309; Lansing V. Muscatine Co., 12 Int. ReV. Rec. 56; 1 Dillon, 522. That a statute giving precedence to the lien of taxes is constitutional, see Ly-decker V. Palisade Co., 33 N. J. Eq. 415. That state taxation which abrogates existing contracts is unconstitutional, see Murray V. Charleston, 96 U. S. 432.

4 Supra, sec 137 et seq. 666, 672; Richmond R. R. Co. V. Louisa R. R. Co., 13 How. 81-5; Charles River Bridge V. Warren Bridge, 11 Pet. 420.