The East Saginaw Manufacturing Co. v. City of East Saginaw

• Decision Date: 26 October 1869
• Citation: 19 Mich. 259
• Court: Michigan Supreme Court
• Parties: The East Saginaw Manufacturing Co. v. The City of East Saginaw et al

19 Mich. 259

The East Saginaw Manufacturing Co. v. The City of East Saginaw et al

Supreme Court of Michigan

October 26, 1869

Heard October 15, 1869 [Syllabus Material] [Syllabus Material] [Syllabus Material] [Syllabus Material] [Syllabus Material] [Syllabus Material] [Syllabus Material] [Syllabus Material] [Syllabus Material] [Syllabus Material]

Appeal in Chancery from Saginaw Circuit.

This was an injunction bill against the City of East Saginaw and Charles V. Deland, City Marshal, to prevent the collection of a tax levied by the municipal authorities upon the rea estate of the complainant.

The bill states that the complainant is a corporation formed under the general mining and manufacturing law of Michigan, in April, 1859, for the purpose of manufacturing salt from salt water, to be obtained in the State of Michigan; that prior to the year 1859, and until the fact was demonstrated by the experiment and expenditure of complainant, it was not known that brine of sufficient strength to profitably make salt existed in Michigan; but it had been supposed that perhaps such brine might be found, and the State had expended considerable sums of money from 1838 to 1842 to settle the question, but without any satisfactory solution thereof; that the act to encourage the manufacture of salt, approved February 15, 1859, was passed to induce individuals to make further experiments in that direction; that a large amount of money was required to make such experiments, which would have proved a total loss in case of failure; that the risk was great, and that the complainant was solely induced to take such risk by the encouragement held out in said act; that in June, 1859, the requisite buildings and machinery having been provided, a well was commenced near the Saginaw River, and drilling continued until the early part of 1860, when, at the depth of 669 feet, brine was found; and the complainant, relying upon said act, erected works and commenced the manufacture of salt about the middle of the year 1860, and prior to March 9, 1861, had actually manufactured 31,740 bushels of salt; and complainant claims that its property used for boring for and manufacturing salt is exempt from taxation, and that the right to such exemption became and was a vested right, which could not be taken away without its consent; that all of complainant's property was purchased and used for the purposes of said manufacture; that the city of East Saginaw, in disregard of complainant's rights, caused a tax to be levied upon its property for the year 1867, amounting to $ 1,145.04, and that it is claimed that said tax is a lien upon complainant's lands; and the bill is filed for the purpose of removing the cloud thus raised on complainant's title, and also for the purpose of having complainant's right to such exemption from taxation established and declared.

The defendants appeared and answered, and a replication was filed. Afterwards, by stipulation, the answer was withdrawn, and a general demurrer was substituted, on which the cause was heard and a decree for a perpetual injunction was granted. The defendants appeal to this Court.

W. L. Webber, for complainant and appellee.

If the tax levied is illegal and void, there can be no question as to the complainant's right to relief, and the point to be settled on the law and the facts as stated in the bill is: Is this tax a legal and valid one? As to this we make two points:

1. The tax is illegal and void as to complainant, because at the time complainant was incorporated, and also when it became the owner of the property in question, the act under which it organized imposed a specific tax of one-half of one per cent on its capital stock paid in, and money borrowed, which was in lien of all State taxes to be paid by the corporation. (1 Comp. Laws, Sec. 1,819.) In 1865 this section was changed by the Legislature so as to authorize a tax upon the property of such corporations upon the same principle as individuals are assessed and taxed. Laws 1865, p. 23. It was not legal to change the rate or principle of taxation as to complainant without its consent. Piqua Branch Bank v. Knoop, 16 How. 369; Dodge v. Woolsey, 18 How. 331.

2. But the main point upon which the complainant relies, and upon which the Court is requested to pass, is the one specifically set out and claimed in the bill. By the act, approved February 15, 1859 (Laws of 1859, p. 551), entitled "An act to encourage the manufacture of salt in the State of Michigan," the State, as complainant claims, contracted with complainant that all its property, real and personal, used for the purpose of boring for and manufacturing salt in this State, should be exempt from taxation; and complainant further claims, that while the provision of the Constitution of the United States which prohibits a State from passing a law impairing the obligation of contracts remains in force, it is not in the power of the State to abrogate that contract. But it may be said, Here is no contract. Let us see. A State, being an organized association of individuals for governmental purposes, acts through its representatives, and may do any act which in the opinion of those representatives is for the general good of its inhabitants, unless such act is prohibited by the constitution. Sears v. Cottrell, 5 Mich. 251.

The encouragement of manufactures has always been deemed a wise policy on the part of the Government, and particularly is this the case when the article is one of prime necessity, like that of salt. The history of the search for salt in this State proves that our people have always so regarded it.

The population of Michigan in 1860 was 749,113, showing consumption of 749,113 bushels of salt, equal to 149,822 barrels, which, at two dollars per barrel, gives $ 299,644, as the amount sent out of the State every year for salt. Certainly it is a gain to the State to have this money kept at home. In the manufacture of salt everything is kept at home. The nails to fasten the hoops on the barrels are the only imported article. Every barrel made adds so much wealth to the State.

If a surplus be made and sold elsewhere, to that extent other States contribute to the wealth of this. We say, then, the Legislature could well afford to make a liberal offer to any who would incur the expense and take the risk of sinking experimental wells, and accordingly the offer contained in the said act of 1859 was made.

The complainant accepted the offer, incurred the expense, at its own risk, and by its success has added vastly to the wealth of the State; and, we may add, that the complainant was the only company or corporation that did accept the offer or make any expenditure in the Saginaw Valley to that end, until after this complainant's efforts had proved successful. We say, then, here was contract. Here were parties competent to contract, the State being one party, the complainant the other. Here also was a subject fit to be contracted for. Here was a good and sufficient consideration, and the contract was closed. A proposition made by the State, accepted and acted upon by the complainant. This gives to the complainant a vested right to the exemption from taxation as promised in the act and claimed in the bill.

It is supposed by the defendant that the act of March 15, 1861 (Laws of 1861, p. 305), engrafted a limitation upon the right, which has now expired, and that the right expires with the limitation. But if we are correct in saying that here was a contract which gave a vested right to the complainant, then it is not competent for the Legislature to affect the right.

On this point we shall call attention first to the fact, that in the act of 1859 there is no right of repeal or alteration reserved by the Legislature. The act is positive and unconditional.

We do not claim that this fact will prevent a repeal of the act, but that no subsequent repeal of the act will affect any rights acquired while the act is in force.

Puffendorf says (as cited in Butler v. Palmer, 1 Hill 335), "The law itself may be annulled by the author; but the right acquired by virtue of that law whilst in force must still remain." See also--Commonwealth v. Essex Company, 13 Gray 239, 253.

We here call attention to the peculiar phraseology of the act of 1859, under which the complainant claims the exemption. It is not an act of incorporation, but applies as well to individuals as to corporations.--Sec. 1 provides, "That all companies or corporations formed, or that may be formed, for the purpose of boring for and manufacturing salt in this State, and any and all individuals engaged or to be engaged in such manufacture, shall be entitled to the benefits of the provisions of this act."

Now here is a general offer, open to all. Whether wise or or unwise, provident or reckless, is not the question. The object to be obtained was to induce investment and experiment, without expense to the State in case of failure. The bare statement of the facts in the bill is stronger than argument. This solemn promise of the State is made, and without condition or qualification. Parties invest their money in property on their faith in it, and use that property in this business. It is difficult to conceive of a more extreme case. Can this Court say that the Legislature in 1861 intended the change in the act to apply to property before that time acquired and then in use for the purpose mentioned? The act of 1861 does not in express terms refer to property already in use for that purpose, and will be satisfied by making it apply to property to be thereafter put to that use. A retroactive effect will not be given to a statute, if its terms will admit of a different construction. On construction alone then, complainant is entitled to the...