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683
34 S.Ct. 218
58 L.Ed. 435
The concession of the court was that in private contracts, 'in the absence of a
covenant or condition to the contrary, it is an implied covenant in every lease
that the lessor shall pay all taxes and assessments levied on the leased land
during the term.' Stated in this form, the rule appears to be a rule of policy to
which special considerations may set a limit. But it might be suggested that if
the state should expressly covenant against such assessments, it could not
impair the obligation of its contract by a subsequent law. The words used in
these leases are 'lease, demise, and let:' and from Spencer's Case, 5 Coke, 16a,
17a, 1 Smith, Lead. Cas. 52, 15 Eng. Rul. Cas. 233, down to the present day,
these words have been said to imply A COVENANT. 1 WMS. SAUND. 322,
NOTE 2; mostyn v. west mosTyn cOal & i. co. l. R. 1 C. P. Div. 145, 152, 45
L. J. C. P. N. S. 401, 34 L. T. N. S. 324, 24 Week. Rep. 401; Mershon v.
Williams, 63 N. J. L. 398, 406, 44 Atl. 211. Words express whatever meaning
convention has attached to them; and so it may be argued that the state has
covenanted against this tax in express terms.
3
The question is, then, whether our duty requires us to overthrow a decision that
the policy of the state law excludes a constructive obligation to indemnify
against the exercise of the sovereign power of taxation from leases by the state.
Put in this form, it is not hard to answer. When the law creates an obligation
outside of the expressed intent of the parties, it must consider all the
circumstances, and the effect with reference to them. In ordinary cases the
whole property is taxed, and which party shall bear the burden is not a matter of
public concern. But when the state makes the lease, the supposed obligation
would be an obligation not to tax,a restriction of public import not lightly to
be imposed. Providence Bank v. Billings, 4 Pet. 514, 561, 7 L. ed. 939, 955;
Wells v. Savannah, 181 U. S. 531, 539, 540, 45 L. ed. 986, 991, 992, 21 Sup.
Ct. Rep. 697; St. Louis v. United R. Co. 210 U. S. 266, 273, 274, 52 L. ed.
1054, 1057, 1058, 28 Sup. Ct. Rep. 630. J. W. Perry Co. v. Norfolk, 220 U. S.
472, 480, 55 L. ed. 548, 551, 31 Sup. Ct. Rep. 465. It is urged that to deny the
state's obligation discriminates unconstitutionally against this class of lessees,
since all others are free from the burden. But that is not true. Whether landlord
or tenant shall pay a tax is a matter of private arrangement, and the practice one
way or the other has no bearing on the matter. The argument from inequality
really works the other way. If these leaseholds are not taxable, they are a
favored class of property; for ordinarily leaseholds are taxed even if they are
lumped and included in the value of the fee. When an interest in land, whether
freehold or for years, is severed from the public domain and put into private
hands, the natural implication is that it goes there with the ordinary incidents of
private property, and therefore is subject to being taxed. See New York ex rel.
Metropolitan Street R. Co. v. New York State Tax Comrs. 199 U. S. 1, 38, 50
L. ed. 65, 25 Sup. Ct. Rep. 705, 4 Ann. Cas. 381.
The plaintiffs in error think that thus far there has been a failure to understand
their contention that these assessments are against the land, and therefore are
met by the supposed contract of the state, that the lessees should have the land
free of all charges. The court below appears to us to have decided in direct
response to that argument that the contract of the state did not go so far, and we
are of opinion that we ought not to pronounce the decision wrong. There was
some subsidiary discussion of the meaning and operation of the statutes, but
upon those matters we do not go behind the judgment of the supreme court of
the state.
Judgment affirmed.