rations owning or operating any railroad in this State," as amended by the act of 1897, is in violation of the Constitution and laws of the United States relating to commerce.

The act of 1897, if it repeals the act of 1893 so as to take away the right of exemption provided in the act of 1893, is in violation of the Federal and state constitutions prohibiting the impairment of the obligation of contracts. Binghamton Bridge case, 3 Wall. 51, 74; Salt Co. v. East Saginaw, 13 Wall. 377; Grand Lodge case, 166 U. S. 143; Morawetz on Private Corporations, 2d ed. § 318; Humphrey v. Pegues, 16 Wall. 249; E. T. V. G. R. Co. v. Pickerd, 24 Fed. Rep. 614; Bergman v. Building Association, 29 Minnesota, 275; Piqua v. Knoop, 16 How. 376; Corvin v. Board of Commissioners, 1 McCrary, 521; City Ry. Co. v. Citizen's R. R. Co., 166 U. S. 557; Wellman v. C. & G. T. Ry. Co., 83 Michigan, 600; Travers v. St. P. M. & N. Ry. Co., 76 N. W. Rep. 217.

The law of 1897 did not repeal the law of 1893 so as to take away from railroad corporations which had constructed their lines north of the forty-fourth parallel subsequent to the passage of the act of 1893 the right of exemption from taxation of the same for the period of ten years after construction when the gross earnings did not exceed $4,000 per mile. Com. v. P. & E. R. R., 164 Pa. St. 252-261; Detroit Street Ry. Co. v. Guthard, 16 N. W. Rep. 328; C. & O. R. R. Co. v. Miller, 114 U. S. 176; Travers County v. St. P. M. & N. Ry. Co., 76 N. W. Rep. 217; Colton v. Montpelier, 71 Vermont, 413; Binghamton Bridge case, 3 Wall. 51, 74; Sutherland on Statutory Construction, § 481; Endlich on Interpretation of Statutes, §§ 271 et seq.

Mr. Charles A. Blair, Attorney General of the State of Michigan, and Mr. Roger Irving Wykes for appellee:

The act of 1897 operated as a repeal of the act of 1893. Manistee &c. R. R. Co. v. Commissioners, 118 Michigan, 349; Northern Central v. Maryland, 187 U. S. 261; Gulf &c. Ry. Co. v. Hewes, 183 U. S. 66. The State had power to repeal the act of 1893.

191 U. S.

Argument for Appellee.

In considering whether a State has contracted away its sovereign powers, nothing is to be taken against the State by intendment.

The right of taxation is a sovereign right, inherent in every sovereignty whose existence and exercise are essential to the existence and continuance of government, and although in certain instances it may be granted away, every presumption is against the grant, which is not to be extended beyond what is actually expressed. The exemption must be clearly made out, and doubt is fatal to the claim. Providence Bank v. Billings, 4 Peters, 561; Gilman v. Sheboygan, 67 U. S. 510; Ohio L. Ins. & T. Co. v. Debolt, 57 U. S. 435; Railroad Co. v. Maryland, 10 How. 393; Bank v. Skelley, 1 Black, 447; Railroad Tax, 18 Wall. 225; Railroad Co. v. Loftin, 98 U. S. 559; Newton v. Board of County Commissioners, 100 U. S. 561; Vicksburg, etc., R. Co. v. Dennis, 116 U. S. 665; Southwestern R. R. Co. v. Wright, 116 U. S. 231; Erie R. Co. v. Pennsylvania, 21 Wall. 492, 499; Memphis Gaslight Co. v. Shelby Taxing Dist., 109 U. S. 39, 401; Yazoo, etc., R. Co. v. Thomas, 132 U. S. 174, 185.

The grant of exemption was a mere gratuity—a bounty— and had not the elements of, and cannot be construed as, a contract. The essential element of a binding contract, viz., a consideration, is wanting. East Saginaw Mfg. Co. v. City of East Saginaw, 19 Michigan, 259; 2 Am. Rep. 82; Welch v. Cook, 97 U. S. 541; Tucker v. Ferguson, 22 Wall. 527; Grand Lodge &c. v. New Orleans, 166 U. S. 143; West Wisconsin R. Co. v. Supervisors, 93 U. S. 595; 118 Michigan, 350; Christ Church v. Philadelphia, 24 How. 300; Salt Co. v. East Saginaw, 13 Wall. 377, 379.

The constitution of the State, and the general railroad law of 1873 reserved the right of repeal and alteration and this right has been sustained by the courts. Detroit v. Detroit &c. Road Co., 43 Michigan, 140, 147; Detroit St. Ry. v. Guthard, 51 Michigan, 180, 182; Detroit v. Railway, 76 Michigan, 421, 426; Mason v. Perkins, 73 Michigan, 303, 318; Bissell v. Heath, 98 Michigan, 472, 478; Attorney General v. Looker, 111 Michigan,

Argument for Appellee.

191 U. S.

498, affirmed 179 U. S. 46; Smith v. Lake Shore & M. S. Ry. Co., 114 Michigan, 460, 472.

The construction by the Supreme Court of Michigan of the authority of the legislature under the reserved right to alter, amend or repeal corporate charters, contained in the state constitution, is final and conclusive, and will be followed by the Federal courts. Luther v. Borden, 7 How. 40; Bucher v. Cheshire R. Co., 125 U. S. 555; Pittsburg, etc., R. Co. v. Backus, 154 U. S. 421; McElvaine v. Brush, 142 U. S. 155; Miller's Exrs. v. Swann, 150 U. S. 132.

There are numerous Federal cases upholding the right of a State to alter or amend a corporate charter where the right so to do is reserved in the Constitution, a prior general law, or the act of incorporation.

The insertion of a clause reserving the right to alter, amend or repeal, indicates that such practice grew from a suggestion contained in the opinion of Mr. Justice Story in the Dartmouth College case, 4 Wheat. 712, to the effect that corporations and corporate charters might by such reservation be kept under control. Tomlinson v. Jessup, 15 Wall. 454, is a case on all fours with this.

Where such right is reserved, the charter and all rights and privileges held thereunder are subject to legislative control, and may be repealed or taken away at the will of that body and the sole limitation upon the authority of the legislature, is that vested rights which can be held independently of the charter or the charter contract, cannot be interfered with. An exemption from taxation is not a vested right, and may be taken away or altered where the right to alter, amend or repeal is reserved. Spring Valley Waterworks v. Schottler, 110 U. S. 352; Hoge v. Railway Co., 99 U. S. 349; Greenwood v. Freight Co., 105 U. S. 13; Railroad Co. v. Maine, 96 U.S. 499; Louisville Water Co. v. Clark, 143 U.S. 1; Sinking Fund Cases, 99 U. S. 700; Pearsall v. Grand Northern Ry., 161 U. S. 663; Covington v. Kentucky, 173 U. S. 232; Citizens' Savings Bank v. Owensboro, 173 U. S. 636; United States v. Union Pacific Ry.,

160 U. S. 37, and cases cited; Miller v. State, 82 U. S. 478, 499; Holyoke Co. v. Lyman, 82 U. S. 500; Pennsylvania College Cases, 80 U. S. 190; Union Passenger Railway Co. v. Philadelphia, 101 U. S. 528.

The right of repeal, alteration and amendment, reserved in fundamental law, is applicable to, and gives right to withdraw, exemptions from taxation contained in acts of incorporation. Attorney General v. Preston, 56 Michigan, 177; Nelson v. McArthur, 38 Michigan, 204; Smith v. Railway Co., 114 Michigan, 472; Randall v. Schweikert, 115 Michigan, 386; Mason v. Perkins, 73 Michigan, 320; Northern Central v. Maryland, 90 Maryland, 447; S. C., 187 U. S. 269.

Immunity from taxation is not a property right. Citizens' Savings Bank v. Owensboro, 173 U. S. 652, nor is it a franchise, Morgan v. Louisiana, 93 U. S. 221, but the exemption from taxation is a mere privilege, Wilson v. Gaines, 103 U. S. 417; Detroit Street Railway v. Guthard, 51 Michigan, 180; St. Louis & San Francisco Railway Co. v. Gill, 156 U. S. 649, which does not inhere in the property. Chesapeake & Ohio Railway v. Miller, 114 U. S. 176, 184; Louisville Water Co. v. Clark, 143 U. S. 1; Covington v. Kentucky, 173 U. S. 231, 238.

It is questionable as to whether the Michigan legislature has authority to create an inviolable contract to exempt corporations from taxation. Walcott v. People, 17 Michigan, 68.

Section 3 of article III of the general railroad law does not violate the commerce clause of the Federal Constitution.

If the tax is not on the interstate receipts, the mode of determining the amount of such tax is immaterial, and the validity of the law fixing them is a matter of legislative policy and discretion, and is not open to criticism by the courts. Home Insurance Co. v. New York, 134 U. S. 594, 600; Maine v. Grand Trunk Railway Co., 142 U. S. 217, 228; W. U. Tel. Co. v. Massachusetts, 125 U. S. 530; Pullman P. Co. v. Pennsylvania, 141 U. S. 18; Pittsburgh &c. R. Co. v. Backus, 154 U. S. 421; W. U. Tel. Co. v. Taggart, 163 U. S. 1; Adams Ex. Co. v. Ohio, 165 U. S. 194.

MR. JUSTICE HOLMES delivered the opinion of the court.

This is an appeal from a decree of the United States Circuit Court dismissing the plaintiff's bill on demurrer. The bill seeks to enjoin the auditor general of the State of Michigan from collecting a tax, on the ground that the law imposing the tax is contrary to the Constitution of the United States as impairing the obligation of contracts and interfering with interstate commerce.

The alleged contract is contained in a law of May 27, 1893, § 3, which, after levying a specific tax on railroads, provided "that the rate of taxation fixed by this act or any other law of this State shall not apply to any railway or railroad company hereafter building and operating a line of railroad within this State north of parallel forty-four of latitude until the same has been operated for the full period of ten years, unless the gross earnings shall equal four thousand dollars per mile, except," etc. Afterwards, on October 23, 1893, the Menominee and Northern Railroad Company was incorporated under the laws of the State, and forthwith conveyed all its property, rights and franchises to the plaintiff, a Wisconsin corporation, which is assumed to stand in the shoes of the Michigan company. The plaintiff thereupon constructed the road. This road is north of parallel forty-four, its gross earnings never have been equal to four thousand dollars per mile, and it would be entitled to the exemptions just stated if the law of 1893 still were in force. But on June 4, 1897, the State passed a law amending the act of 1893, and levying a "specific tax upon the property and business of [every] railroad corporation operated within the State," and enacted that "when the railroad lies partly within and partly without this State, prima facie, the gross income of said company from such road for the purposes of taxation shall be on the actual earnings of the road in Michigan, computed by adding to the income derived from the business transacted by said company entirely within this State, such proportion of the income of said company arising from the