State Ex Rel. Sovereign Camp Woodman of the World v. Boring ( 1935 )

In the main I concur with what is said in Judge Campbell's able opinion, and in the conclusion reached, but there are some expressions therein which I cannot fully agree with. For instance my view is that while the homestead exemption amendment cannot operate to withdraw homestead property from taxation for the payment of bonds issued before the amendment was adopted, where, as here, there was pledged for their payment the annual levy of a sufficient tax on all taxable property (which then included homesteads) unless some other "adequate means" is first definitely provided, entirely sufficient to raise the necessary revenue for the debt service which would otherwise be lost by omitting homestead property, yet, if and when such other adequatesource of revenue is definitely provided, I think homesteads could then be omitted from the rolls without waiting for the substituted taxes thus levied to be actually collected and paid over. But it is not made to appear that any other adequate means of meeting the obligations here involved has been provided. On the other hand, it appears that the present omission to tax homestead properties would inevitably operate to impair the obligation of the bond contracts here involved under existing conditions. As far back as Columbia County v. King, 13 Fla. 451, this court said: "When a county issues its bonds under a statute which provides the time and manner of discharging them * * * the Legislature cannot, by repealing the Act or changing it, limit the amount of taxes to be levied to a rate insufficient to raise the amount necessary to meet the obligation, unless otheradequate means are provided. Such a law impairs the obligation of the contract."

It is ably and earnestly contended by counsel for respondent, and in the brief of amicus curiae, that these bond contracts were issued subject to reserved power of the sovereign State to enact future laws or constitutional amendments designating what shall be deemed taxable property, and that taxing units cannot by contract limit or prevent the exercise of this sovereign state power. Admitting the force of this contention as a sound general rule, it must not be forgotten that this sovereign state power is itself limited by the paramount power of the national Constitution to this extent — that the State cannot pass any law (and a constitutional amendment is a law) which impairs the obligations of contracts. So, these bonds, while issued and purchased with notice of the State's sovereign power above referred to, were also issued with notice of the limitation of that power, which limitation prevents the state from passing any statute or constitutional amendment which would apply to contracts, previously and lawfully made, in such a way as to substantially and materially impair the obligation of such existing contracts, although such statute or constitutional amendment would be entirely valid and effective as applied to contracts entered into after its adoption. This provision of the federal Constitution prohibiting any State from impairing contract obligations formed a part of the Constitution as framed by the Convention of 1787 and thereafter ratified and adopted by the several States. It was not added thereto by way of amendment. The experience of a hundred and fifty years has proven the wisdom of our forefathers in giving this provision a place in our national organic law. So, while all contracts are entered into in the light of and subject to the State's sovereign power in matters of taxation, they are also entered into in the light of the limitation placed on the exercise of that power by the contract clause of the national Constitution.

It is not every exemption from taxation which would impair the obligations of pre-existing contracts. The effect of some exemptions might be so neglible as not to work any impairment. But where the property exempted from taxation by any State law takes away such a large proportion of the taxing powers which had theretofore been pledged to secure the payment of contracts already lawfully made, as to materially impair the obligation of such contracts, then the paramount authority of the contract clause of the national Constitution becomes operative and requires that such state law be so construed and applied if possible as not to effectuate such impairment. While I have read with care the able arguments of counsel to the contrary, the conclusion above reached seems to me to be inescapable and inevitable.