City of New Orleans v. Houston

• Decision Date: 06 December 1886
• Citation: 7 S.Ct. 198,119 U.S. 265,30 L.Ed. 411
• Parties: CITY OF NEW ORLEANS and others v. HOUSTON, State Tax Collector, and another
• Court: U.S. Supreme Court

119 U.S. 265

7 S.Ct. 198

30 L.Ed. 411

CITY OF NEW ORLEANS and others v. HOUSTON, State Tax Collector, and another.

December 6, 1886.

W. H. Rogers and J. Ward Gurl y, Jr., for appellants, City of New Orleans and others.

J. A. Campbell, for appellees, Houston, State Tax Collector, and another.

MATTHEWS, J.

On the twenty-seventh of January, 1881, the Louisiana State Lottery Company, alleging itself to be a corporation under the laws of the state of Louisiana, filed its bill in chancery against the city of New Orleans and the tax assessors for the parish of Orleans, the object and prayer of which were to obtain a perpetual injunction restraining the defendants from the assessment and collection of certain taxes about to be enforced against the complainant by the seizure and sale of its property. On final hearing there was a decree in conformity with the prayer of the bill, from which the defendants below prosecute the present appeal.

The allegations of the bill are, in substance, that by an act of the legislature of the state of Louisiana passed in 1868, being act No. 25 of that year, the Louisiana State Lottery Company was established and organized as a corporation; that, among other immunities and franchises granted by said act, it was provided in article 5 that the company 'shall pay the state of Louisiana the sum of forty thousand dollars per annum, which sum shall be payable quarterly, in advance, from and after the first day of January, 1869, to the state auditor, who shall deposit the same in the treasury of the state, and which shall be credited to the educational fund; and said corporation shall be exempt from all other taxes and licenses of any kind whatever from the state, parish, or municipal authorities;' that in the year 1871 legal proceedings were instituted by the city of New Orleans against the said company, in the superior district court for the parish of Orleans, for the purpose of enforcing, on behalf of said city, certain taxes alleged to have been assessed against it, notwithstanding said exemption contained in its charter, the city of New Orleans claiming therein that said exemption was void; that such proceedings were had thereon that, on final hearing in the supreme court of Louisiana, a judgment was rendered in favor of the lottery company, declaring said exemption to be valid, and the said taxes illegal; that the said company claims that the provision in its said charter, exempting it from taxes as aforesaid beyond the sum of $40,000, payable annually, is a contract between the state of Louisiana and itself, and has been expressly confirmed and recognized as such by the present constitution of the state of Louisiana, adopted in 1879, in article 167, all the provisions of which, it is alleged in the bill, the complainants have complied with.

The bill further alleges that, notwithstanding the provisions of the said charter, and in defiance of the judgment of the supreme court of Louisiana, and contrary to the constitution of the state, the defendants 'are about to levy and assess a tax upon the capital stock and other property of your orator, and the other defendants hereinbefore named have threatened and are about to take proceedings against your orator for the collection of said illegal tax, which is illegal because prohibited by the constitution of the United States as violative of the said contract between your orator and the state of Louisiana;' that the said officers of the state pretend to justify their action under the provisions of act No. 77 of the legislature of Louisiana of 1880, which the complainant avers to be null and void and of no effect, so far as it may be construed to authorize the proceedings of the defendants. The bill alleges that the complainant has always promptly paid the amount called for by its charter to the state treasurer, and in advance, and owes nothing to the state on that account; and accordingly prays for an injunction to restrain the defendants from further attempts to enforce the collection of the tax complained of.

To this bill a joint and several answer was filed by all of the defendants. That answer admits the incorporation of the Louisiana State Lottery Company as alleged in the bill, and that its charter constitutes a valid contract between the state of Louisiana and the company. It admits that the defendants are about to levy a tax upon the capital stock and upon other property of the complainant, but denies that such proceedings are illegal; and claims that act No. 77 of the year 1880, passed by the Louisiana legislature, is in no respect null and void.

On final hearing a decree was passed wherein 'the court decrees and declares that the act of the legislature, (No. 77, Acts 1880,) so far as it imposes a tax upon the capital stock of the complainant, or upon the shares of the stock held by the shareholders of the complainant, is in conflict with article 5, section 1, of complainant's charter, found in act No. 25 of the acts of 1868, and therefore impairs the obligation of a contract, and is void. The court further decrees and declares that, under the provisions of said charter as adopted as a contract by the constitution of 1879, the capital of the complainant, both in the aggregate and as held by its shareholders, is exempted from all taxation of every kind, excepting the annual payment of forty thousand dollars. The court further decrees that the defendants herein be enjoined and restrained in manner and form and to the extent prayed for in the bill of complaint herein.'

It is objected to this decree in the first place, on behalf of the city of New Orleans, that that municipality was not properly in court by due service of process; but the objection does not seem to be well founded in fact. There was service of process upon the mayor, which is conceded to be the statutory method of serving process in such cases, and the city actually appeared by attorney, and answered.

The principal question, however, arises upon the terms of article 167 of the constitution of the state of 1879. That clause is as follows: 'The general assemby shall have authority to grant lottery charters or privileges: provided, each charter or privilege shall pay not less than forty thousand dollars per annum in money into the treasury of the state: and provided, further, that all charters shall cease and expire on the first of January, 1895, after which no lottery shall be drawn within the state of Louisiana. The forty thousand dollars per annum now provided by law to be paid by the Louisiana State Lottery Company, according to the provisions of its charter granted in the year 1868, shall belong to the Charity Hospital of New Orleans, and the charter of said company is recognized as a contract binding on the state for the period therein specified, except its monopoly clause, which is hereby abrogated; and all laws contrary to the provisions of this article are hereby declared null and void: provided, said company shall file a written renunciation of all its monopoly features in the office of the secretary of state within sixty days after the ratification of this constitution.'

It appears that by an act of the legislature of Louisiana which took effect on the thirty-first of March, 1879, act No. 25 of the year 1868, which incorporated and established the Louisiana State Lottery Company, and all other laws on the same subject-matter, were repealed, and the Louisiana State Lottery Company was thereby abolished and prohibited from drawing any and all lotteries, or selling lottery tickets, either in its corporate capacity, or through its officers, members, stockholders, or agents, either directly or indirectly. That act also made it a penal offense to draw any lottery, or have any connection or interest in or with the drawing of any lottery, in the state, or to sell, or offer to sell, any lottery tickets, or to set up or promote any lottery in the state. This statute took effect before the adoption of the constitution of 1879, and was in force when the latter went into operation in December, 1879.

It is now contended, on the part of the appellants, that article 167 of the constitution of t e state does not have the effect to revive the original charter of the Louisiana State Lottery Company as though it had never been repealed, but revives it only so far as under that clause the general assembly was authorized to grant lottery charters or privileges in the future; that this constitutional authority to grant new lottery charters or privileges does not warrant the legislature in stipulating, by way of contract, that the minimum license tax of $40,000 per annum shall be in lieu of all other taxes upon the property, and operate to exempt the company, so far as taxation is concerned, from the effect of other clauses of the constitution; that by other provisions of the constitution, particularly article 207, no property can be exempt from taxation except public property, places of religious worship or burial, charitable institutions, buildings and property used exclusively for colleges and other school purposes, real and personal estate of public libraries, household property to the value of $500, and, for the period of ten years from the adoption of the constitution, the capital, machinery, and other property enployed in certain enumerated manufactories, wherein not less than five hands are employed in any one factory.

It is argued that the whole proper effect to be given to the provisions of article 167 of the constitution is to secure to the Louisiana State Lottery Company such a charter as the general assembly was authorized thereby to grant to any other lottery company, and to modify it as though it had been actually granted by the general assembly under that clause. This intent is inferred from the language of the constitution, which specifically forbids the future existence of the 'monopoly clause' of the charter of the company, and requires it to file a...