U.S. Supreme Court
Murray v. Charleston, 96 U.S. 432 (1887)
Murray v. Charleston
96 U.S. 432
1. Wherever rights acknowledged and protected by the Constitution of the United States are denied or invaded by state legislation which is sustained by the judgment of a state court, this Court is authorized to interfere. Its jurisdiction, therefore, to reexamine such judgment cannot be defeated by showing that the record does not in direct terms refer to some constitutional provision nor expressly state that a federal question was presented. The true jurisdictional test is whether it appears that such a question was decided adversely to the federal right.
2. The provision in that Constitution that no state shall pass a law impairing the obligation of contracts is a limitation upon the taxing power of a state as well as upon all its legislation, whatever form it may assume. Therefore a law changing the stipulations of a contract, or relieving a debtor from a strict and literal compliance with its requirements, enacted by a state in the exercise of that power is unconstitutional and void. chanroblesvirtualawlibrary
3. A city, when it borrows money and promises to repay it with interest, cannot, by its own ordinances, under the guise of taxation, relieve itself from performing to the letter all that it has expressly promised to its creditors.
4. Debts are not property. A nonresident creditor of a city cannot be said to be, in virtue of a debt which it owes him, a holder of property within its limits.
In 1783, the state of South Carolina incorporated the City of Charleston. Among other powers conferred upon it was that of making
"such assessments on the inhabitants of Charleston, or those who hold taxable property within the same, for the safety, convenience, benefit, and advantage of the city as shall appear to them expedient."
Under this power, there was an ordinance of the city, ratified March 22, 1870, "to raise supplies for the fiscal year ending Dec. 31, 1870." Sec. 1 authorizes and requires the city appraiser to assess a tax of two cents upon the dollar of the value of all real and personal property in the city for the purpose of meeting the expenses of the city government for the current fiscal year.
Sec. 3 directs that the tax assessed on city stock shall be retained by the city treasurer out of the interest thereon, when the same is due and payable.
A similar ordinance was ratified March 1, 1871, for the fiscal year ending Dec. 31, 1871.
The tax was accordingly assessed. That upon the city stock was retained out of the interest due on it to the holders thereof.
Murray, as a holder, brought suit, Nov. 17, 1871, in the Court of Common Pleas for the County of Charleston against the City Council of Charleston to recover the amount of the tax which the treasurer had retained out of the interest due to him, alleging that the said tax was illegal.
The answer of the council, among other matters, sets forth that the stock was duly assessed and that it was not expressly exempted from taxation by the ordinance under which it was issued.
The court tried the case without a jury, and found the following facts:
1. That the plaintiff has been, since January, 1870, the holder and owner of $35,262.33 of six percent stock issued by defendant, the interest thereon payable quarterly.
2. That the plaintiff is not a resident of Charleston, but a resident of chanroblesvirtualawlibrary
3. That the defendant owed the plaintiff for interest on his said stock the several sums set forth in the fourth paragraph of the complaint, on the several days therein named, and that it paid the same to him, less certain sums retained.
4. That the several sums so retained by the defendant, amounting in all to $440.75, were by the defendant kept as the amount of taxes due from the said plaintiff to the said city, being a tax at the rate of two percent per annum upon the principal of said stock, said tax being imposed by virtue of the ordinance of the said City Council of Charleston, ratified March 22, 1870, entitled "An ordinance to raise supplies for the fiscal year ending Dec. 31, 1870," and a similar ordinance, ratified March 1, 1871, to raise supplies for the fiscal year ending Dec. 31, 1871, and that said stock was not specifically exempted from taxation by the ordinance under which it was issued.
5. That the plaintiff, by his agent, protested against the deduction of said tax and duly entered his protest on each receipt for interest on said stock.
The court announced as conclusions of law:
1. That the City Council of Charleston, as a municipal corporation, has a right, under the constitution and laws of the state, to tax the property of the plaintiff invested in stock issued by it, said stock not being specifically exempted by law from taxation nor being exempt from taxation by the ordinance under which it was issued.
2. That the City Council of Charleston had a right to collect the tax imposed on the property of the plaintiff in said stock by retaining the amount of such tax out of payments made to the plaintiff on account of the interest due thereon, and the plaintiff cannot recover the same.
Judgment was accordingly rendered, whereupon Murray appealed to the supreme court, and in his notice of appeal set forth the following grounds:
1. That plaintiff, being resident in a foreign country, is not liable to the tax levied and retained by the city council.
2. That the laws of the state do not authorize the city council to levy and retain a tax upon its own stock.
3. That the levying and retaining of said tax is a violation of good faith in the contract of loan, and impairs the obligation of said contract, and is therefore unconstitutional and void. The supreme court affirmed the judgment of the chanroblesvirtualawlibrary
court of common pleas and held that the stock was taxable property within the city, and that the right of taxing it
"existed at the time of the contract, and so entered into it as to become one of its necessary elements and attributes. The obligation of the contract was not impaired by the imposition of the tax, because it was a property which attached to the contract."
Murray then sued out this writ of error. chanroblesvirtualawlibrary