196 N.E. 464 | Ill. | 1935
Lead Opinion
Jeanne C. Berman, appellant, filed her bill of complaint in the circuit court of Cook county to enjoin the board of education of the city of Chicago from issuing bonds in the sum of $10,000,000 for the purpose of paying tax anticipation warrants. The bonds were to be issued under the provisions of an act of the General Assembly purporting to authorize the board of education of any school district, in any city having a population exceeding 500,000 inhabitants, to issue bonds to pay tax anticipation warrants where the taxes anticipated had not been collected. A motion in the nature of a demurrer was sustained and the bill was dismissed for want of equity. From that decree the present appeal was taken.
Appellant, a citizen, resident and tax-payer of Chicago, alleged in her bill that Chicago comprises one school district; *537 that she owns both real and personal property within the district which has been subject to all past taxes and will be subject to all future taxes levied therein, and that she has fully paid all of her taxes, including those anticipated by the tax warrants in question. She alleged that pursuant to the supposed authority given by the act in question the board of education on January 24, 1934, passed a resolution for the issuance and sale of bonds in the amount of $10,000,000 for the purpose of paying outstanding tax anticipation warrants drawn against the taxes for the years 1928 and 1929, and that at the request of the board of education the city of Chicago passed, and the mayor signed, a certain ordinance ratifying the resolution of the board and providing for the issuance of the bonds. The bill further alleged that the tax anticipation warrants in question were not obligations of the board of education, but, on the contrary, were payable solely out of the taxes anticipated by them, if and when collected, and not otherwise; that the use of the proceeds of the sale of such bonds, or their exchange in retirement of tax anticipation warrants, would amount to an appropriation of money for the purpose of paying a contract which by its terms is not an obligation of the board of education, and that the act of the General Assembly, the resolution of the board and the ordinance of the city of Chicago are each in direct violation of section 2 of article 2, section 14 of article 2 and section 9 of article 9 of the constitution of this State. The bill further alleged that defendants were preparing to carry out these objects and would do so unless enjoined; that the ordinance and the act of the legislature should be decreed to be void as violative of the constitutional provisions above mentioned; that the act was by its terms retroactive and authorized the appropriation and use of moneys by municipalities for private rather than corporate purposes; that it altered the obligation of contracts created by tax anticipation warrants, and by implication attempted to give municipalities *538 the right to create a debt, within the constitutional meaning of section 12 of article 9 of the constitution, without any consideration therefor.
The act relied upon as authority for issuance of the bonds in question was passed by the legislature in 1933, (Smith's Stat. 1933, chap. 122, pars. 327i-327p; Cahill's Stat. 1933, chap. 122, par. 410 (4);) and sections 3 and 6 thereof were amended in February, 1934. (Laws of 1933-34, first, second and third special sess. p. 241.) The act provides that where the corporate authorities of a school district in a city having a population exceeding 500,000 inhabitants shall have levied taxes for educational or certain other purposes and shall have sold anticipation warrants against such taxes, and where the taxes have not been paid or collected in amount sufficient to pay the warrants and interest thereon, the board of education may, with the consent of the city council, subject to certain limitations, issue bonds for an amount sufficient to pay the warrants, with interest, remaining outstanding and unpaid twelve months following the month in which the taxes became due. The bonds are to bear interest at a rate of not more than six per cent, to mature within twenty years, and may be issued without submitting the question to a vote of the people. The city council is required to levy a tax, to be paid annually, upon all taxable property of the district sufficient to pay the principal and interest of the bonds. The proceeds of the bonds are required to be kept separate for payment of the proper warrants and for placing the excess in the bond and interest sinking fund of the board of education, to be used for paying the principal and interest of the bonds, and for the proportionate abatement of subsequently levied taxes with such money as may remain after the payment of all warrants. It is stated that the authority granted by the act shall be considered as cumulative and not as repealing any existing laws. Section 8 states the purpose of the act in the following language: *539 "This act is adopted for the purpose of empowering the corporate authorities of such school district to recognize the moral, equitable and honorable obligation resting upon such school district and its inhabitants to pay such tax anticipation warrants in spite of the non-collection of the taxes constituting their source of payment and to assume as a legal obligation such moral obligation in like manner as a just person recognizes in his own affairs, the duty to re-pay money received and used for his own benefit, having in mind the benefits to said school district and its inhabitants resulting from the purchasers of such tax anticipation warrants furnishing money to maintain and operate the public schools therein."
Tax anticipation warrants are issued pursuant to statutory authority, which provides the circumstances under which they may be issued, the amount permitted to be outstanding, and, in part, prescribes the form and wording of the warrants themselves. (Smith's Stat. 1933, chap. 146 1/2, Sec. 2.) They may be issued only against taxes already levied, and the statute in mandatory terms requires "that warrants drawn and issued under the provisions of this section shall show upon their face that they are payable solely from said taxes when collected and not otherwise," etc. Such warrants do not constitute, and cannot be construed as constituting, any promise of payment, either express or implied, on the part of the taxing body issuing them, but the holder thereof "must rely solely upon the ability and fidelity of the revenue officers in the collection and payment of the money mentioned in the warrants." (Fuller v. Heath,
It is claimed by appellees that section 1 of article 8 of the Illinois constitution imposes a mandatory duty upon the legislature to "provide a thorough and efficient system of free schools," by which, as a matter of public policy, they say it is required to enact legislation authorizing the payment of a debt for which the city was at first only morally liable, but which, upon validation by legislative enactment, the courts are powerless to question. Their basic argument is that there is no constitutional limitation, express or implied, upon the power of the General Assembly permitting a school district to recognize a moral obligation *541
as one of legal and binding effect. True it is that we have held that the power of the legislature to enact laws to establish and maintain school systems is not subject to judicial review unless some limitation imposed by the constitution is exceeded. (Fiedler v. Eckfeldt,
The principle is well established that all taxation by municipal authorities must be for corporate purposes. (Wetherell v. Devine,
Another constitutional limitation upon the power of the General Assembly to vest the proposed taxing power in the corporate authorities here is found in the due process clause — section 2 of article 2. This section is violated if a citizen's money is taken from him under the guise of a tax for any other than a public purpose. (Chicago Motor Club v. Kinney,
In arriving at this conclusion we have not failed to consider the cases cited and relied upon by appellees as authority to sustain the power of the General Assembly to pay a soldiers' bonus, to pay for injuries or for services rendered, to pay for volunteer advancements for the public welfare, to pay claims arising from depredations of war, and claims arising from the taking of private property to prevent disease. Claims and payments for any of these purposes, involving the public welfare and oft-times the public health and safety, have at times been justified under *544 the sovereign powers of the different States involved where there existed no constitutional inhibitions, but these cases offer no close analogies to the issues here presented.
In our opinion the act of the Fifty-eighth General Assembly, entitled "An act to authorize the board of education of any school district constituted by law in any city having a population exceeding 500,000 inhabitants to issue bonds to pay tax anticipation warrants where the taxes anticipated have not been collected and to provide for their payment," is unconstitutional and void, together with the ordinance passed pursuant thereto. The decree of the circuit court of Cook county is therefore reversed and the cause is remanded to that court, with directions to overrule the demurrer to the bill.
Reversed and remanded, with directions.
Concurrence Opinion
I agree with the result reached in this opinion and with the reasoning thereof except as to what is said therein with respect to double taxation.
Dissenting Opinion
It is my opinion that the legislation which we are considering could be, and ought to be, sustained; that the legislature had the power, under the constitution, to permit the issuance of bonds for the purpose intended; that the opposite result of this case would be for the direct financial welfare of approximately one-half the people of Illinois, and that the cases cited and reasons given for the judgment reached do not sustain it. I am therefore respectfully dissenting from the view of the majority and will briefly state my reasons.
It is first argued by counsel for the appellant that there was no obligation existing between the municipality and the holder of a tax warrant other than that of a trustee to see to it that the funds collected are applied to the payment *545
of the outstanding warrants. They cite the cases of City ofSpringfield v. Edwards,
It is further argued by the complainant that section 2 of article 2 of the constitution also prohibits a municipality from appropriating money for any but a corporate purpose; that this appropriation is not for a corporate purpose because of the fact that the tax anticipation warrant created no direct liability on the part of the school district, and the warrant on its face limits the holder to his claim to a particular fund, and limits his right to payment from that fund and nothing more. On this branch of the case appellant citesMidland Lumber Co. v. City of Dallas City,
The appellant also claims that the act violates section 9 of article 9 of the constitution, which requires that all municipal taxes must be uniform in respect to persons and property within the jurisdiction of the body imposing the tax, it being claimed that the act in question permits the imposition of a double burden for a single object, upon which branch of the case the appellant cites and relies upon *547 City of Chicago v. Collins,
That portion of appellant's argument which demonstrates that tax anticipation warrants are not debts and do not represent a direct legal obligation of the municipality issuing them must be conceded to be sound, and it is therefore necessary to inquire as to whether or not all the other contentions made by her necessarily follow from that premise. The real question for our decision, then, is this: Does the constitution prevent the legislature from authorizing its creature, the school district, to assume as a legal liability an outstanding moral obligation? The answer to this question determines the issues in this case, and I believe that answer is to be found by determining whether or not such an assumption of liability is for a corporate purpose.
Although its outlines are indistinct and its boundaries at times difficult of exact discernment, the field of corporate purpose is large. In Taylor v. Thompson,
As recently as the case of Hagler v. Small,
I am of the opinion that it is clearly a corporate purpose and in the interest of the welfare of the whole people to preserve the credit and future borrowing power of the school district in question. It is a matter of common knowledge, of which the court cannot pretend ignorance, that practically all of the municipal tax-imposing bodies of the State utilize tax anticipation warrants from time to time, most of them being entirely dependent on this source of funds during the latter part of each tax year. Even if the salutary principles of equity and common honesty were to be disregarded, the plainest and simplest considerations of policy should forbid impairment of this source of money if it can be avoided.
While it must be admitted, as contended by the appellant, that the district was not technically liable on the warrants as for a promise, yet it must also be admitted with equal candor that the district hired the use of the money, at an expense for interest, as a convenience to itself in its use and a detriment to the warrant holder who made the advance. It must also be admitted that but for such advancement during the recent economic crisis the schools could not have remained open. These elements, in my opinion, create not only a "moral obligation," but one which verges upon a legal liability so closely that the distinction can be found only in the strict letter of the instrument by which the use of the money was obtained. The situation of the district is analogous to that of a borrower who has secured his lender by some instrument which is so technically defective as to be unenforceable. Although he might *550 be able to defeat payment by standing on his legal defenses, yet if he has due regard for sound morals, and even the slightest interest in maintaining his credit for future use, he will find some means to discharge the obligation. It is inconceivable to me that what an honest man who wishes to protect his personal credit would do for himself can not be done by a municipal corporation, when the legislature, which is the fountain of all its power, says that it may. The only perils to be perceived in such a procedure lie in its unrestrained multiplication, and this is effectually guarded against by the constitutional limitation upon the total indebtedness which may be incurred.
The cases of Midland Lumber Co. v. City of Dallas City,supra, City of Chicago v. Brede, supra, and the other cases above mentioned as being relied upon by appellant, are not in conflict with this conclusion on this question. The taxes imposed in those cases were without specific legislative authority, whereas the tax in this case is pursuant to a direct grant of power. Neither is this conclusion in any way in conflict with the constitutional prohibition which prevents the General Assembly from imposing taxes upon municipal corporations, or the inhabitants or property thereof, for corporate purposes. The tax in this case is not imposed by the General Assembly but by the local taxing bodies, pursuant to authority but not to any command of the General Assembly. Sections 9 and 10 of article 9 of the constitution were carefully considered by this court in Wetherell v. Devine,
The appellant's remaining contention is that this legislation constitutes double taxation, but the authorities fail to sustain such an argument. In 1 Cooley on Taxation, (4th ed.) sec. 223, we find the general rule in this respect stated in the following language: "Direct duplicate taxation, and by this is meant 'double taxation' in the strict legal sense of the term, means taxing twice for the same purpose, in the same year, some of the property in the territory in which the tax is laid, without taxing all of it a second time. * * * To constitute double taxation, objectionable or prohibited, the two or more taxes must be (i) imposed upon the same property; (2) by the same State or government; (3) during the same taxing period; and (4) for the same purpose." By whatever name it may be called, the purchasing of these outstanding tax warrants and the issuance of bonds in place of them amount to nothing more nor different than a refunding operation, and such operations have never been found objectionable as constituting double taxation, although it is quite obvious that in every case of refunding the same property will be again taxed for a purpose for which it had presumptively been taxed before. City ofQuincy v. Warfield,
In my opinion the legislature was within its constitutional limits and the decree below should be affirmed. *552