Barbour v. Louisville Board of Trade

OHIEE JUSTICE HINES

delivered the opinion oe the court.

On tile fifteenth of March, 1862, the Louisville^ Board of Trade was incorporated. ■ The act of incorporation contains these provisions: The corporation may hold real estate, by purchase or otherwise, not to exceed in value at any time $300,000, and may make such regulations “as may advance the commercial character of Louisville, fix and determine just rules and customs among its business community, acquire and disseminate useful business information and avoid and adjust, as far as practicable, the controversies and misunderstandings which may arise between individuals engaged in trade.” The act further provides that the company may authorize subscription of stock in shares not exceeding $100; that-the company shall engage in ho traffic, and that the Legislature reserves the power to alter or amend the charter at pleasure.

On the twenty-third of April, 1873, the charter was-amended as follows : “Any real estate held by the Louisville Board of Trade in the city of Louisville, by purchase in fee-simple, not exceeding one hundred by two hundred feet in area, and any improvements thereon, shall be, and are hereby, exempted from all State taxes, so long as said property shall be occupied by said Board of Trade for the purposes-contemplated in its organization. And the general council of the city of Louisville is authorized to-exempt such property so held and occupied from all taxes to be levied by said general council of said city of Louisville.”

There was no organization under the original char*648ter and amendment until 1879, when the company purchased real estate in Louisville, within the charter limits, and has been engaged in business since. Certificates of membership were issued and sold for ten dollars each that were worth, at the institution ■of this action, near $170: the increased value of certificates of membership coming from annual dues, income derived by the company from renting such portions of the buildings owned by it as were not used in transacting the appropriate business of the •company.

The question presented on the appeal is whether the property of the Board of Trade is exempt from State taxation by reason of the act of 1873, quoted. This involves the inquiry as to whether that act is constitutional.

An act of the Legislature may be unconstitutional because impliedly forbidden by the Constitution, or because expressly thereby forbidden. An act is, by implication, unconstitutional when not legislative in its nature; such as an act taking the property of one citizen and giving it to another, or an act making one a judge in his own case. Such attempted legislation. is arbitrary and despotic, not in its nature legislative, the legislative department of the government being limited by its nature as the executive and judicial, their respective powers being circumscribed by the rules of Magna Charta and of the ■common law, constitutions generally not undertaking to define the duties and powers of either of these branches of the government. When the legislation is in terms forbidden, we need look no fur*649tlier in order to declare it unconstitutional, but when it is not so denounced, we have the more delicate task of inquiring as to the nature and limit of legislative powers. We are of the opinion that the act exempting the property of appellee is unconstitutional, both because it is not legislative in its nature, and because expressly declared in the Constitution to be beyond the authority of the Legislature.

The power of taxation grows out of the necessity to preserve the government by laying a common burden upon every citizen enjoying its protection of life, liberty and property, and is limited in its nature to objects that are public, as distinguished from those that are personal or private in their character.

Taxation immediately for the benefit of an individual is a contradiction in terms. The right of the Legislature to contract away this attribute of sovereignty, when not forbidden by the Constitution, has •been held in many of the States to exist, and has been so repeatedly held by the Supreme Court of the United States, but never by a concurrence of the entire court except where the purpose was clearly a .public one.

But as the Supreme Court has the final jurisdiction to determine whether such legislation is contrary to the Constitution of the United States, which forbids a State to pass any law impairing the obligation of a contract, and have held that it is, we must .aquiesce unless we find that the Constitution of this .State in terms forbids such legislation. Of this we will now inquire.

The first section of the thirteenth article of the *650Constitution of this State declares “that all freemen, when they form a social compact, are equal, and no man, or set of men, are entitled to exclusive, separate public emoluments or privileges from the community, but in consideration of public services.”

A construction of this provision in a case of taxation has never arisen in this State; but it has been considered in other cases between individuals where separate or special privileges had been granted by the Legislature. The first case in which the meaning of this provision arose and was decided, without division, was that of Gordon, &c., v. Winchester Building Association, 12 Bush, 110. At the time of the passage of the charter of the association, the general law forbade, under penalty of the forfeiture of all the interest, the charging of interest at a greater rate than ten per centum per annum. The charter-authorized the association to charge more than ten per centum, and this court declared the act unconstitutional because it granted to the' association an exclusive privilege without the consideration of public services on the part of the association. In the case of Smith v. Warden, decided January 20, 1883 (80 Ky., 609), it was held that a special act, giving a clerk a longer time in which to collect his fees than was allowed by the general law as to other clerks, was unconstitutional. In the latter case, no-provision of the Constitution is referred to, but it is expressed in the opinion that the legislation was unequal and unjust, and therefore unconstitutional. It is insisted that some of the legislative acts declared, to have been unconstitutional were so declared be*651cause they were exceptional in their character; but whether they were separate or exceptional, they were equally within the constitutional prohibition. They were privileges granted without the performance of any public service, while there was a general law denying the privilege to citizens in general. There is no other provision of the Constitution forbidding-special, separate or exceptional legislation. This provision can not apply to political office or hereditary distinctions, because the twenty-eighth section of the thirteenth article of the Constitution provides: “That the General Assembly shall not grant any title of nobility or hereditary distinction, nor create any office, the appointment of which shall be for a longer time than for a term of years.”

Whatever difference of opinion there may be as to whether the first section of the thirteenth article of the Constitution applies in restraint of the grant of privileges as directly presented between individuals, there can be no doubt that this provision is a restriction upon the exercise of the taxing power. It is certainly a “public privilege” to be exempt from taxation. The exercise of such power is purely an act of sovereignty. Independently of any constitutional provision, the surrender of such an element of sovereignty is never to be presumed. Every intendment is against it so strongly that a reasonable doubt of the legislative intention to surrender or limit must be solved against such intention. Uniformity and equality of taxation is of the essence of the power, and an exception in one case is the increase of the-burden of taxation upon others not thus favored.

*652The apparent conflict in the application of this •doctrine between the several State and Federal courts has arisen from the different views of the courts as to what constituted a ‘ • public purpose, ’ ’ and that inquiry arises here: Is the exemption claimed in consideration of a public service and for a public benefit? When it is conceded. that the company is required to perform a public service, within the meaning of this provision of the Constitution, it must also be con■ceded that the Legislature are the exclusive judges as ■to what amount of public service will justify the grant; but they can not be the judges as to whether there are public services to be performed; for, in such case, they would be permitted to nullify the provision of the Constitution.

When any department of the government is constituted the sole judge of its own powers, there is .no longer a constitutional limitation of powers.

It will be seen from the charter of appellee, already ■quoted, that no public duties or services are prescribed ■ as a consideration for the grant of exemption from taxation. The only limitation upon the exemption is that it shall cease when the company no longer uses the property for the purposes provided in the charter. The Constitution provides that the grant of an exclusive or separate privilege must be supported by the “consideration of public service.” That consideration must be either past, present or future. There is no pretense of a past or present consideration. If it is future, it must be prescribed in the act of incorporation. We find no duties prescribed there that could ¡support a contract. The powers granted are mere *653gratuities, to be exercised at the pleasure of the company, and if they were imperative they are not public in their nature. The gathering and. dissemination of commercial information, and the making and enforcing rules for the conduct of business men in the city of Louisville, may be incidentally beneficial to the city as well as to the State at large, but those-things are not public duties or public services within the meaning of the Constitution.

The company makes its own rules, which appear to-be primarily for its benefit. Its own members divide-the profits and enjoy the privileges and benefits resulting directly from the association. To the public there is only an incidental advantage, that would necessarily flow from such an enterprise instituted without legislative aid. By an amendment to the charter of this company in May, 1880, they were given the power to define the duties of the Louisville flour inspectors, and to fix their fees. This amendment imposes no duty upon appellee, it is a mere grant of a privilege that may or may not be exercised, and even if exercised, would not be the performance of a public service. Appellee may perform a service that is directly beneficial to the local public of the city of Louisville, but the existence of such benefit would not authorize a tax upon all the people of the Commonwealth to foster such an enterprise. The exemption of this corporation from State taxation is a tax, to that extent, upon every citizen of the Commonwealth, as every other citizen must help to bear the burden thus lifted from the corporation.

As a general rule, the test of the right to exempt *654property is the existence of the right to levy a tax to foster such property. The levy of a direct tax upon the whole people of the State, to be paid to this corporation to forward the 'objects stated in their charter, would be declared at first blush unconstitutional, and yet that is what is indirectly doné by the exemption. If the same power exercised by this •corporation had been conferred upon a designated individual, it would strike any one as palpably beyond legislative authority. But there is no difference in principle between' the corporation • and an individual. If there is the'power to exempt the one there is unquestionably the power to exempt the other. It is not every enterprise that is incidentally beneficial to the public that will authorize the State to foster it at the expense of the people at large. The ■object must appear upon the face of the legislation to be directly for the public good, and of such a character as to call for the aid of the State to forward it in the exercise of a governmental function. The building up in Louisville of any extensive manufactures would be of an incidental benefit to the people of the whole State, but no one would suppose for a moment that the whole State should contribute ■to it.

Every citizen is entitled to equal rights and equal privileges with every other citizen. In entering into the social compact called government, he stipulates-to bear only his proportion of the common burden of taxation, and when more is imposed upon him, his property is taken against his consent and with■out -consideration, it is spoliation. The exemp*655tion of charitable institutions and schools has always been recognized as valid, because done in the exercise of a governmental function ; but private undertakings, primarily for private gain' or aggrandizement in any way, can not be protected individually and specifically by the government, but must come under general laws that operate alike upon all.

We are of the opinion that the act of exemption is unconstitutional, and the judgment is reversed and cause remanded with directions to dismiss the petition and dissolve the injunction.