1 Reported in 283 N.W. 727. Two cases consolidated here. One, No. 31,609, is referred to in argument as the Owatonna case; the other, No. 31,789, as the Minneapolis case. In the former the Trustees of Pillsbury Academy, a corporation, proceeding under L. 1935, c. 300, ask what amounts to a declaratory judgment that the involved real estate, situated in Steele county and owned by the academy, is exempt from taxation. The Minneapolis case is a statutory proceeding for the collection of taxes on real estate owned by the academy. The latter, by answer, asserts the same claim to exemption. In both cases decision was against the state, and it appeals from the resulting judgments. They sustain the claim that Pillsbury Academy was, by an act of the territorial legislature, granted an irrepealable exemption from all taxation, which continues to bind the state under the rule of Dartmouth College v. Woodward, 4 Wheat. 518, 651, 4 L. ed. 629,662.
By Minn. Const. art. 9, § 1, all "academies, colleges, universities, and all seminaries of learning" are "exempt from taxation." The present claim of Pillsbury Academy, from now on to be called respondent, is not based on that constitutional exemption. That is because in both cases the real estate is not presently used for school purposes, other than that the net income goes into respondent's funds. Hence the property is not within the general constitutional exemption. State v. Carleton College, 154 Minn. 280, 191 N.W. 400.
The controlling facts make a brief history of respondent. The narrative begins with L. 1854, c. 36, entitled "An act to incorporate the Minnesota Central University." It consisted of 14 sections and contemplated an "institution of learning" at a place to be designated by the trustees "on the West side of the Mississippi, between the mouth of Rum River [Anoka] and Lake Pepin." That institution was to be "erected on a plan sufficiently extensive to afford ample facilities to perfect the scholar." *Page 368
Section 11 declares that "all corporate property belonging to the institution, both real and personal, is, and shall be free from taxation." On that pronouncement of the territorial legislature is based the present claim to continuing, complete, and irrepealable exemption from taxation.
The Minnesota Central University was organized pursuant to L. 1854, under the patronage, as that charter intended, of the then Minnesota Baptist Association. It was located at Hastings in 1857 and functioned there for a time. Owing to the vicissitudes of the period, it lost its Hastings real estate under foreclosure in 1861.
In 1857 and again in 1858 the law of 1854 was amended in particulars not now important. Many years may now be passed by the simple statement, taken from respondent's brief, that "during the period beginning 1867 to the taking over of Minnesota Academy [now respondent] under the act of 1878, no classes were conducted by the corporation."
In 1858 Minnesota was admitted to the Union. Its constitution declared, art. 9, § 1, that: "* * * taxes * * * shall be as nearly equal as may be; and all property on which taxes are to be levied shall have a cash valuation, and be equalized and uniform throughout the state." Section 3 went on to say: "Laws shall be passed taxing all * * * property, according to its true value in money." Those provisions remained through 1878 and until 1906, when, by amendment, §§ 1, 2, 3, and 4 of art. 9 were superseded by the present § 1.
In 1867 the territorial charter of Minnesota Central University was again amended and "continued" by chapter 9 of the general laws for that year. The amendments are not of present interest.
At their annual meeting in 1877 the trustees of Minnesota Central University passed this resolution:
"* * * that in view of the practical present abandonment of the work of the Minnesota Central University, all the books, moneys, securities, and personal property of whatsoever description, belonging to said corporation, be and the same are given, granted, conveyed and transferred to 'The Baptist Centennial Committee of the *Page 369 State of Minnesota'; and that the secretary of this board be, and is, hereby, authorized and instructed to deliver all such property to the said committee, and to execute in behalf of this board, suitable written conveyances and transfers of the same."
1. In 1878, when the corporation was in the moribund condition just indicated, the state legislature passed Sp. L. 1878, c. 69. Its title reads:
"An Act to Amend Chapter Number Thirty-six (36) of the Session Laws of One Thousand Eight Hundred and Fifty-four (1854), Being an Act to Incorporate the Minnesota Central University, Passed by the Legislative Assembly of the Territory of Minnesota, Approved March Fourth, One Thousand Eight Hundred and Fifty-four (1854)."
Both title and text speak in terms of mere amendment. But what was actually done was the creation of a new, rather than the confirmation of an old, corporation. It is but another case where the phraseology of characterization does not control as against real substance.
Section 1 declared: "That there be established in the city of Owatonna * * * an institution of learning by the name of the Minnesota Academy." A board of trustees was then named consisting in part of the then trustees of Minnesota Central University. The trustees "and their successors" were declared to "be and they are hereby created [all italics ours] a body politic and corporate to be styled the trustees of Minnesota Academy." They were directed to have and use a common seal and to make and alter by-laws.
Section 5 fixed the time for the first meeting of the trustees "to organize."
Section 11 declared that "all corporate property belonging to the institution * * * is and shall be free from taxation."
Section 12 refers to "the board of trustees created by this act." Then, by language in the present tense, the new trustees were "invested with all the property, real, personal and mixed, and all rights of action now held or possessed by the trustees of the Minnesota Central University," whether in the latter's possession or *Page 370 held in trust, as some of it was, by the Baptist Centennial Committee of the State of Minnesota (the Baptist Centennial Committee was then itself a subsidiary to the Baptist State Convention).
By § 10 of the law of 1878, §§ 4, 7, 13, and 14 of the act of 1854 "and all acts or parts of acts inconsistent with this act is hereby repealed." Section 4 of the old law was the one fixing its location and giving the Minnesota Central University the scope and objectives of a university rather than a college or academy. Section 7 had prescribed a special method of serving a summons on Minnesota Central University. Section 13 had expressly given the old institution the power to establish a preparatory department. Section 14 simply covered the item of calling the first meeting of its first trustees.
Thus, from the simple combination of verbs in the present tense with their subject nouns, the intention to create a new corporation by the law of 1878 is plain. It is unimportant that the institution was given a new name. But it is of significance that this rechristening, with its context, shows an intention to reduce the enterprise from university to academy status and purpose. That idea, where not expressed, is implicit throughout the whole law of 1878. Gone is the old purpose "to perfect the scholar." Gone also the thought that the new corporation needed express statutory leave for a preparatory department. Finally the new institution was denied the express power, possessed by its predecessor, to confer "all honors and degrees as are usually conferred by the most learned institutions in the United States." L. 1854, c. 36, § 1.
Doubtless because of the restricted ambition of the new academy, the limit of its permissible annual income was fixed at $30,000. That maximum for the Minnesota Central University had been $70,000.
In sum, the law of 1878 speaks, as to purpose, wholly in terms of creating a new entity and not at all in words suggesting that any existing unit was being continued or confirmed. The operative and primary declaration of purpose was environed by secondary indicia that creation of the new rather than confirmation of the old was the one objective. In striking contrast is L. 1867, c. 9, *Page 371 which "continued" the territorial charter of Minnesota Central University. So also is art. 8, § 4, of the state constitution. It "perpetuated" the then franchises of the University of Minnesota. State ex rel. University of Minnesota v. Chase,175 Minn. 259, 220 N.W. 951. If the purpose had been simply to continue the old entity, it was already "invested" with the "property, real, personal and mixed, and all rights of action," with which, notwithstanding, the law of 1878 "invested" respondent.
It is noticeable that the law of 1878, while careful to see that the corporation created thereby was "invested" with all the property of its predecessor, omitted anything subjecting it to the latter's debts. It seems clear, therefore, that the new entity, in the absence of its express assumption of them, could not have been held liable thereon. Huff v. Winona St. P. R. Co. 11 Minn. 114 (180).
So Minnesota Central University was not continued by Sp. L. 1878. Instead, a new corporation, the present respondent, was thereby created to take as its own the new charter and all there was of property of the old Minnesota Central University. No other conclusion is tenable under the authorities and upon the facts. Ames v. L. S. M. R. Co. 21 Minn. 241. Respondent was organized and carries on under the law of 1878. By Sp. L. 1887, c. 330, its name was changed to Pillsbury Academy.
2. True, if either on its face or in application to its subject matter we could find reasonable ground upon which to declare the law of 1878 constitutional rather than otherwise we should do so. The existence of that rule no one denies. We are convinced, however, that the purpose of the law to create a new corporation is, by the plain language of the law itself, put beyond question. If that be so, as we think it is, it would be improper to control decision by any extraneous aid to interpretation. Such rules as that requiring a holding of constitutionality, if it is possible, are not to be used first to create ambiguity by construction and then to remove it by the same process.
Considering the problem a bit further, this observation seems appropriate. If the law of 1878 were to be sustained as legitimate amendment, the result would be this: Before our constitutional *Page 372 prohibition of special legislation, art. 4, § 33, adopted in 1881, the legislature could have taken any corporate charter granted by territorial law (there were many of them) and, by a new act labeled as a mere amendment, brought into being a new corporation with franchises unlimited, both as to number and content, although that process had been barred from the beginning by the state constitution. If the result is to thwart a constitutional mandate, what is in effect wholly new law cannot be changed into old law by the mere expedient of calling it old.
Recurring to Ames v. L. S. M. R. Co. 21 Minn. 241, it is both interesting and instructive to note that while the involved amendatory act was sustained on a rehearing it was with express misgiving and only because the court did [21 Minn. 288] "not feel that certainty of conviction" necessary to enable it to hold the statute unconstitutional. With an illuminating generalization that exactly fits this case, the decision is qualified and limited by this declaration (21 Minn. 284) :
"That a legislature might, in such a case, misapprehend the legal effect of the act passed by it, just as it might mistake as to the limits of its constitutional power, is possible. It might, without intending to create a new corporation, attempt such radical and essential changes in the constitution of an old one as to amount to the creation of a new one; and if such must be the necessary result of such changes, the act must be just as clearly within the constitutional prohibition as though the legislature actually intended the result, and fully understood that such would be the effect of its act."
We are unable either to uproot or plow around that proposition. It appears inherently sound and self-sustaining. We consider that it makes our conclusion impregnable.
3. This is not a case where, as argued for respondent, the legislature merely gave an existing corporation a new name and a new wardrobe of franchise and privilege. The latter was offered and accepted, but to and by a new corporation. The trouble is that *Page 373 one of the new garments tendered by the legislature, immunity from taxation, the legislature had no constitutional power to give.
In 1878 our state constitution did not have its present prohibition (added in 1906) that "the power of taxation shall never be surrendered, suspended or contracted away." Art. 9, § 1. But even then the state could not grant to any corporation, new or old, an immunity from taxation. That is because art. 9, § 3, of the constitution, as it then was, made it imperative that "Laws shall be passed taxing all * * * property" of which exemption is not permitted (by the constitution). Precluded thereby was any exemption other than those specified in § 3, which did not include property of an educational institution not used for educational purposes. (State v. Carleton College, supra.) It was expressly so held in Le Due v. City of Hastings, 39 Minn. 110, 38 N.W. 803.
By the law of 1878, § 8, the legislature attempted to grant to respondent the immunity of taxation on which is based its claim to exemption. It could not do so because of the constitutional bar just mentioned. For this jurisdiction the law is so settled by State v. G. N. Ry. Co. 106 Minn. 303,119 N.W. 202, and its companion case, State v. C. G. W. Ry. Co.106 Minn. 290, 301, 119 N.W. 211, 213. In the latter it was said that not only would an attempt at original grant of such an immunity to a new corporation be prevented by the constitution, but also that "the legislature could no more grant this special privilege by the revival of an old corporation than it could confer all similar immunity "upon an entirely new company."
In this field of alleged impairment of contractual immunity from taxation the cases are numerous, and all that retain authority are against respondent. Even where the privilege has had initial existence for one grantee, the most studied and formal attempt of legislatures to recognize or confirm it in a successor, or in a mere revival of its first corporate holder, have been held ineffectual if a constitutional bar has intervened.
In Trask v. Maguire, 85 U.S. (18 Wall.) 391, 409,21 L. ed. 938, it was held that a constitutional prohibition of special forms of or exemptions from taxation applied "in all its force against the renewal of an exemption equally as against its original creation." *Page 374 Upon that ground State v. G. N. Ry. Co. supra, was affirmed (with title reversed) by the Supreme Court of the United States (216 U.S. 206, 30 S. Ct. 344, 54 L. ed. 446). Therein are cited and somewhat reviewed, as in accord, the following additional cases: Morgan v. Louisiana, 93 U.S. 217, 23 L. ed. 860; Louisville N. R. Co. v. Palmes, 109 U.S. 244, 3 S. Ct. 193,27 L. ed. 922; Memphis Little Rock R. Co. v. Railroad Commrs.112 U.S. 609, 5 S. Ct. 299, 28 L. ed. 837; Atlantic G. R. Co. v. Georgia, 98 U.S. 359, 25 L. ed. 185; Keokuk Western R. Co. v. Missouri, 152 U.S. 301, 14 S. Ct. 592, 38 L. ed. 450; Yazoo Miss. Valley Ry. Co. v. Adams, 180 U.S. 1, 21 S. Ct. 240,45 L.ed. 395.
By the decision in the Great Northern case (106 Minn. 303,119 N.W. 202), First Division St. P. P. R. Co. v. Parcher,14 Minn. 224 (297), and quite a catalogue of similar cases following it were in part distinguished and impliedly at least disapproved. Whether and to what extent they were thereby overruled is now of no more than historical interest. For this case the law is settled as above stated.
4. The state questions the power of a territorial legislature to make a contract, in respect to taxation, binding upon the future state. We pass that point without decision, but with this comment. The intention of the federal constitution is that states, on admission to the Union, shall adopt their own constitutions with the republican form of government guaranteed. So the argument is not easily disposed of that, subject only to the federal constitution, each state government was to have, unimpaired, all the power of sovereignty.
The time may be ripe to reopen and reconsider the question whether a state's power of taxation, any more than that of police or eminent domain, may be bartered away, substantially limited, or impaired by act of its own legislature. It is settled that the police power and that of eminent domain may not be so trammeled for all time. With important limitations, the rule is established that the power of taxation, just as much and as vitally an attribute of sovereignty, may be subject to contract limitation. That view has *Page 375 always met with strong and persuasive resistance. Always it has been questioned by eminent authority, and upon reason not easily demolished. We do not discuss the problem further because it has not been argued. We do not consider it forever closed. See note, "Corporate taxation in the United States as affected by the contract clause in the Federal Constitution," 60 L.R.A. 33.
There remains another objection to respondent's claim of contract right which is well founded. We now assume that the original corporation, while it was a going concern and performing on its side what it claims was a contract, first with the territory and then with the state, had the now challenged exemption from taxation. But, before 1867, there had been a complete abandonment of its project by the Minnesota Central University. For that very reason, all its property was transferred unconditionally to the "Baptist Centennial Committee of the State of Minnesota."
There was no contract between the territory and the Minnesota Central University unless there was consideration moving from the latter. Wisconsin Michigan Ry. Co. v. Powers,191 U.S. 379, 24 S. Ct. 107, 48 L. ed. 229. That consideration, if any, was the establishment and maintenance of the contemplated educational institution. Both contract and consideration were continuing. If the consideration failed, the contract as such lapsed. The consideration had failed sometime between 1858 (when the constitution was adopted with its prohibition of tax exemptions) and 1867. Plainly, therefore, if the corporation was continued and reënfranchised by the act of 1878, the process was subject in all things to the state constitution.
True, while for some years before 1878, and as early as 1867, the charter of the old corporation was subject to forfeiture, it was not forfeited. But in that condition of major and continuing default by the university, as a contractor with the state, the state could enact no valid affirmative legislation to resurrect and continue this lapsed contract, except within the limitations imposed by the state constitution. Treated as a contract, the act of 1878 was new, and even if with the old corporation it was a substitute for the original contract. The corporation, new or old, accepted it. It was then *Page 376 subject to any and all limitations upon the power of the state to make such a new contract.
If the exemption was at the beginning a right rather than a privilege, it ceased to be a right and became a mere privilege of the Minnesota Central University when its enterprise was abandoned. In that status, it could have been revoked at any time by the state. 1 Cooley, Constitutional Limitations (8 ed.) 572; Wisconsin Michigan Ry. Co. v. Powers, supra. There could be no more solemn act of revocation than the constitutional prohibition, effective since 1858, of all such exemptions from taxation.
For more than ten years before 1878 the Minnesota Central University had been in complete and destructive default, as a contracting party, under its charter. The latter then, as a law, had become repealable for that default. The rule is, without exception, that "repealable contracts of exemption become immediately subject to the provisions of the new organic law." Note, 60 L.R.A. 49. So, after the constitution was adopted in 1858, the abandonment of its project by the Minnesota Central University made its exemption repealable and repealed. Hence the immunity was defunct — had been for ten years in 1878. The new charter of that year could no more put life into the dead body of the exemption than it could generate the living tissue for a new one. Resurrection and generation of such an immunity were equally forbidden.
It follows that respondent does not have, and under the constitution cannot have, the immunity from taxation which it claims and the supposed existence of which was the only basis for the decision below adverse to the state. In consequence, the judgments in both cases must be reversed and the causes remanded with directions to enter judgments for the state.
So ordered.