84 Pa. 487 | Pa. | 1877
Lead Opinion
delivered the opinion of the court,
We are in no doubt as to the validity of the ordinance of the city of Williamsport of the 22d of June 1868, so far as the same provides for the grading and paving of the streets of the city. In fact all of the improvements projected and carried into execution by the city, and for the payment of which a portion of the city bonds were issued, were strictly within its corporate powers. Without express grant such authority is among the implied powers of a municipal corporation: Barter v. The Commonwealth, 3 P. & W. 253; City v. Tryon, 11 Casey 401; Dillon on Municipal Corporations, § 544. The question of the right of a city to file liens against the real estate within its corporate limits for the cost of curbing, paving, building sewers, &c., is not involved in this case, and stands upon a different footing. Nor have we been able to discover any such fraud in connection with the issuing of the bonds as would affect their validity in the hands of original holders. The question whether the defendants in error are innocent holders of the bonds, and if so, to what extent they can be affected by any equities set up by the city, is wholly immaterial.
The real question here is one of power. The contention on the part of the city is that all of its bonds known as series A, issued in excess of the $200,000 authorized by the Act of Assembly of 21st of March 1867, are illegal and void. In other words, that a municipal corporation possesses no inherent power to issue such bonds, and that in the absence of any such power in its charter, or express legislative authorization, the city is not bound thereby. This is a question of grave importance.
The right of corporations to issue commercial paper, or bonds in the nature thereof, that pass by delivery, has been the subject of much discussion by text-writers and of numerous decisions by the legal tribunals of the country. We may here observe that there is a marked distinction in this respect between private and municipal corporations. This distinction has been lost sight of in many of the adjudicated cases, and is perhaps one of the causes of the confusion into which this branch of the law has fallen. As a general proposition the right of private or trading corporations to issue promissory notes, bonds, or other evidences of indebtedness, unless restrained by their charters or the law of the land, may be conceded. The reason is plain. Such corporations are organized for the purposes of trade and business, and the borrowing of money and issuing
Taken in its broad sense, the power to borrow money and issue bonds therefor cannot be said to be among the implied powers of a municipal corporation. Eor general purposes such power does not exist, for the reason that it is not necessary for the objects for which it was created. Thus it has never been contended, that a municipality may borrow money and issue bonds or notes for objects having no necessary relation to the performance of municipal duties. To admit such a principle would be destructive of such organiza
The cases of The Police Jury v. Britton, 15 Wall. 566, and the Mayor of Nashville v. Ray, 19 Id. 468, were cited as supporting the text in Dillon. In each case the opinion of the court was delivered by Mr. Justice Bradley. The Police Jury v. Britton was evidently decided upon its own peculiar facts. The suit was brought against the parish of Tensas, Louisiana, to recover the amount of 460 coupons of $6 for one year’s interest on 460 bonds of $100 each. It appeared that in December 1860 and January 1861, the levee inspector of the parish of Tensas issued to certain persons by the name of Kennedy and Maxwell, five “ levee warrants” (as they are called) for work done on the levees in Ward No. 3 of said parish, amounting in the aggregate to over $15,000. These warrants seem, to have been issued in regular course, according to the law then in force on this subject. Said law was passed in 1848, with amendments passed in 1850 and 1852. It related to the parish of Tensas alone, and the substance of it was, that the police jury of that parish should appoint a levee inspector, whose duty was to superintend and direct the construction and repairs of all levees in the parish in accordance with the requisition of the police jury : to survey the levees, and where work was required, to let it out to the lowest bidder; and after the work was finished in any particular section the statute directed as follows : “ Then the inspector shall issue a warrant, payable to the contractor, which shall be a legal order upon the treasurer of the levee fund for the amount therein specified.” The statute then provided for the levee fund as follows: “ the police jury are authorized to levy and collect, in the same manner that the state and parish taxes are now collected, an annual tax upon the assessed value of real estate as returned by the assessors of state taxes. Said tax when collected, shall form a special fund for levee purposes alone.” Here we have a special statutory provision, designating the form which such indebtedness shall assume, and providing a particular fund for its payment. There is not a word anywhere authorizing the parish jury to issue any bonds, or create any other evidences of debt, for work on the levees. On the contrary, in restraint of the power of police juries and all other municipal bodies of the state to incur expenditures, the legislature in 1853 passed the following act: “ The police juries of the several parishes, and the constituted authorities of incorporated towns and cities in this state, shall not hereafter have
In the Mayor v. Ray, supra, the judgment of the court was concurred in by a mere majority; the opinion of Mr. Justice Bradley did not receive the sanction of even a majority, and lacks the weight of authority. The facts of the case briefly stated were, that the city officers re-issued the checks of the city drawn by the mayor and recorder upon the treasurer, after the same had been paid. This was done by reason of the embarrassed condition of the city finances and to continue the checks in circulation. It was the mere act of the city officials without the authority of councils. In a suit by A. against the city upon one of these re-issued checks, the court below excluded evidence tending to show fraud and want of consideration and authority to make them in the issue of the notes, and held, that under its charter the city could issue promissory notes, and that if signed by the proper officers and given for a good consideration, they would be -legal and obligatory; that a usage to re-issue such securities was good, and that though upon their face overdue, they were payable on demand and not to be deemed dishonored so as to let in defences against a subsequent holder, until -the lapse of a reasonable time for making demand. The judgment below was reversed upon a writ of error, Mr. Justice Bradley delivering the judgment of the court, and the opinions of himself and Justices Miller, Davis and Field. Justices Clifford, Swayne and Strong dissented. Justice Hunt concurred in the reversal, for reasons connected with the ques-
The Commissioners of Shawnee County v. Carter, 2 Kans. 115, was much relied upon by the plaintiffs in error. Yet when we examine the facts of that case it falls far short of sustaining their position. The commissioners of Shawnee county were authorized by statute to erect a court house at Tecumseh. The act required that warrants should be drawn in favor of the contractor for instalments as they fell due. Instead of doing so the commissioners issued bonds bearing interest at the rate of ten per cent, to the contractors for the instalments. The court held that the bonds could not be issued; that the commissioners were merely authorized to order money to be drawn from the county treasury, and that they could do so only by warrants drawn upon the county treasurer as directed by the statute. We do not question the law of this case. It appears to have been rightly decided. The commissioners were clothed with a limited authority, and the mode of its exercise designated by statute. It was their plain duty to comply strictly with its commands.
In Marcy v. Tsp. of Oswego, 2 Otto 637, and Humboldt Tsp. v. Long, Id. 642, no question of power was before the court. The contention was whether the bonds in question were negotiable, and whether the holder was bound to look beyond the legislative act authorizing their issue. Nor was such question raised in Commonwealth ex rel. Middleton v. The Commissioners of Allegheny
The foregoing are all the cases cited in support of the contention of the plaintiffs in error. With a single exception they are cases of public as distinguished from municipal corporations. The distinction between the two classes of corporations is marked. “ The term municipal corporation has reference to incorporated villages, towns and cities, as distinguished from other public corporations, such as counties and quasi corporations: Dillon on Mun. Cor., § 10. Municipal corporations are called into existence at the direct solicitation, or by the free consent of the persons composing them, for the promotion of their own local and private advantage and convenience. On the other hand counties are at most but local organizations, which for the purposes of civil administration are invested with a few functions characteristic of corporate existence. They are local sub-divisions of a state, created by the sovereign power of the state, of its own sovereign will, without the particular solicitation, consent or concurrent action of the people who inhabit them. The former (municipal) organization is asked for, or at least assented to, by the public it embraces; the latter organization (counties) is superimposed by a sovereign and paramount authority : Hamilton Co. v. Mighels, 7 Ohio 109. A municipal corporation has for its object the interests, advantage and convenience of the locality and its people. A county organization is intended to sub-serve the policy of the state at large in such matters as finance, education, provision for the poor, military organization, means of travel and transport, and especially the administration of justice. A municipal corporation is a government, possessing powers of legislation, and is charged with a general care for the welfare of the people; while a county organization is merely the involuntary agent of the state, charged with the interests of the state in the particular county, and clothed with certain administrative functions, limited in extent and clearly defined by law. There is of course some analogy between the two classes of corporations. They are parts of the same political system. They differ in dignity and in power. Each has such implied powers as are necessary for the execution of its powers expressly granted. But it must he apparent that the implied powers of a municipal corporation are not to be measured by those of a mere public corporation, such as a parish, township or county. There is little analogy between the powers of the councils of a great city, and those of the supervisors of a petty township, or the police jury of a parish.
• Notwithstanding the narrow range of duties and limited powers of strictly public corporations, it is well known that in this state, at least, they have for a long time exercised the implied power of borrowing money. In many counties it has been the practice for county commissioners to borrow money from banks and individuals,
We are not without authorities in favor of the power. In the case of the Bank of Chillicothe v. The Mayor of Chillicothe, 7 Hannum (Ohio) R. 354, the money was borrowed by the city from the bank to improve the streets of the town, and the power was held to be incident to the corporate authority. The case was decided upon the broad ground that if in effecting any of the legitimate objects of the corporation, such as regulating and paving the streets, and promoting the order and good government of the town, for which they were authorized to provide by ordinance, it became necessary to borrow money, the corporation might lawfully do it in the absence of express power in the charter, or of authorization by statute. So in Sturtevant v. The City of Alton, 3 McLean 393, it was held that a corporation having power to grade streets, &c., necessarily has power to make contracts respecting the same, and to issue bonds in payment therefor. To the same point is Mullarky v. Cedar Falls, 19 Iowa 21, in which it was decided that when the act of incorporation confers power upon the town to control its streets, and its duty is to improve them so as to afford a safe and easy transit, it may construct a bridge across a stream dividing a street, and issue its bonds to pay for the same. The City of Galena v. Corwith, 48 Ill. 423, so closely resembles the case at bar as to justify a more extended reference to it. There, as here, there was an express authority to borrow, and there was an issue of bonds in excess of the amount authorized. The charter of the city granted power to borrow so much money as the city might deem necessary, not exceeding $20,000 in any one year, and to issue bonds therefor. The bonds in suit were not issued by virtue of such power but in excess thereof. The city pleaded the general issue, want of consideration, and that the city had no authority to issue the bonds. There was a verdict for plaintiff in the court below, and a writ of error taken on the points raised by the pleadings. The judgment was affirmed, the court (Ch. J. Breese delivering the opinion) saying: “ One single question will, we think, settle the present difficulty. The power in the charter to borrow money permits it to be expended in the useful and permanent improvement of the city. Now, sup- . pose the whole amount is borrowed, and all expended in improvements, has the city no power to provide for its existing debt, which may be twice $20,000 ? * * * Every corporation or every natural
The foregoing cases rest upon the principle, Avhich we think a sound- one, that Avhere a municipal corporation has lawfully contracted a debt, it has the implied power, unless .restricted by its charter or prohibited by statute, to evidence the same by a bill, bond, note or other instrument; that the power to contract a debt carries with it by necessary implication the right to give an appropriate acknowledgment of such debt, and to agree with the creditor as to the time and mode of payment; that in the absence of any statutory provision there is no rule of laAV limiting the extent of the credit. This was evidently the view taken of this subject
Until quite recently, there was not a line in the charter of the city of Philadelphia, or in any Act of Assembly, authorizing the city to borrow money. No such power is contained in the charter of 1701, nor in the Act of 11th March 1789, incorporating the city. The Consolidation Act of 1854 recognises the poAver to borrow as pre-existing and regulates it, and authorizes the consolidation of the debt of the city and districts, to be thereafter known as “ the debt of the city of Philadelphia.” The Act of 27th March 1848, Pamph. L. 273, authorized the city,to subscribe to the stock of the Pennsylvania Railroad Company and to issue bonds therefor. The passage of this act was doubtless OAving to the fact that a doubt existed whether the charter of the company authorized subscriptions by municipal corporations. Eminent counsel differed in regard to it; the late Thomas I. Wharton having asserted in
If the power be a dangerous one it is a proper subject for legislative action. The legislature can abridge it for the future without disturbing the validity of past transactions. This is beyond the power of the judiciary. In fact the subject has already been disposed of by legislative action. The Act of 29th of April 1874, Pamph. L. 65, passed in pursuance of, and to give effect to section 8 of article 9 of the constitution, provides that any city, county, borough or school district, may incur debt, or increase its indebtedness to an amount in the aggregate not exceeding two per centum upon the assessed value of the taxable property thereof, and to issue coupon bonds therefor. In view of this express grant of power, the question under consideration is of little practical importance for the future.
The entire amount of. bonds issued by the city of Williamsport (series A) was $645,000. The bonds were for $1000 each ; 239 of said bonds were issued to take up the prior indebtedness of the city; 289 were issued on the Nicholson pavement contracts; 22 on the Wykoff pavement contracts; 42 for the purchase of engine house, lots and building engine houses; 5 under contracts for grading; 2 for building culverts; and the remainder, 46, under contracts for the construction of drains and sewers. There is no
We cannot assent to the proposition that the implied authority-of the city of Williamsport to issue bonds for municipal improvements was limited or taken away by the Act of 21st March 1867, authorizing the city to borrow $200,000. There is nothing upon the face of the act to indicate an intent to curtail the powers of the city. The object of said act was doubtless to enable the city to provide for its existing indebtedness, of which at the time a large amount was outstanding in the shape of dishonored warrants. We do not say that the act was necessary; it was doubtless considered so by those.who procured its passage, the more so as it contained a provision authorizing the sale of the bonds at a discount of two per cent, per annum. We cannot assume in the absence of any such language in the act itself, that the legislature intended to take away by implication the right of the city of Williamsport, for all future time, to contract debts for municipal purposes. The limitation of the power to borrow money, if it be such limitation, does not affect the right of the city to grade and pave its streets, or perform any other necessary municipal duty. The contract with Mr. Herdie, so far as it related to these matters, was not a borrowing of money within the meaning of the Act of 1867. It was a contract to do certain work and to receive pay in city bonds. Contracting a debt is not borrowing money.
We do not think it necessary to discuss at length the question whether there was a legislative ratification of these bonds. We think they are valid without it. Yet if the case were doubtful it would not be without weight. The fact that a claim against a
We do not think it necessary to pursue the subject further, nor to discuss any of the minor questions involved. Upon a careful consideration of the case, we see no reason to disturb the judgment of the court below. The city must pay “as it is nominated in the bond.”
In affirming this judgment, we do not mean to deprive the city of any special defence to any particular bond or bonds in series A., and not embraced in this suit.
The judgment is affirmed, and it is further ordered that the treasurer of the city of Williamsport do forthwith apply any money now in the treasury of said city, and not otherwise appropriated, to the payment of the accrued interest or coupons now overdue on said bonds, known as series A.
Dissenting Opinion
The following dissenting opinion was filed, October 4th 1877, by
On leaving Harrisburg, where this cause was argued at the close of the session, I was under the belief that an instruction had been given to reverse the decree. Three of us were of that mind. No fault is found with the report of a contrary opinion ; but it is a source of deep regret that this misunderstanding leaves now no opportunity in a two months session to examine and reply to an elaborate argument of twenty-six closely written pages. No option is left but to indicate in a general way the grounds of those who differ from it.
The leading doctrine of the opinion is dangerous in its character,
In substance, and when stripped of all verbiage and general statement, what is the argument which sustains this abuse ? That a power to make certain improvements and perform certain municipal duties, implies a power to contract and a duty to pay, and these again imply a power to give a suitable evidence of the debt, or the obligation to pay. To the extent of these powers and duties let the position be'granted. This may be conceded to be a legitimate argument, when the instrument evidences an actual debt incurred in the execution of these powers, but it cannot be carried a step beyond without violating both law and logic, and endangering the safety of the people. That logic is false which deduces from the power of a mere municipal corporation to contract debts for improvements and the like, and give the contracter or the laborer an evidence of the debt due to him; a power on part of such a corporation, created by law for governmental purposes, to issue commercial paper, be it bonds or notes, payable to the bearer, and negotiable according to the law merchant or general usage, and either'to sell them in the market, or pass them off to individuals by way of a general loan. This power belongs to individuals and private corporations, whose directors are the agents of stockholders, but not to a mere municipality, unless specially authorized by law. If a city contracts with A. to lay a pavement or do other legitimate work, the contract or the work measures the payment to A., and fixes the liability of the city. To him, therefore, a bond or note or warrant may be given as the evidence of his debt, and so far an implied power to issue the paper may be urged. The same may be said of any other service or duty which a city is authorized to perform. So when a power to borrow money is conferred, the loan measures the sum, and the instrument evidences the debt thus incurred. But here again the city is protected by the actual contract of loan, and if the lender be guilty of usury by deducting a large discount, the city may defend. To this extent an inference from the power to borrow money may legitimate the instrument given as the evidence of the debt. But on what principle of logic or right reason, and on what ground of public security- can it be inferred that a mere city government, for certain public purposes, can issue negotiable bonds, not to actual creditors, or for debts actually incurred and measured by the contract or the work done, but to be thrown upon the market or offered at private sale, in any amount the mere will of the councils may choose to resolve. This is not a municipal power. It flows from no relation of the citizens to the corporation. They are not stockholders, nor partners, nor associates, but are a portion of the people, living under a local government for
The labored argument to distinguish between cities and counties, evidences the strain upon the logic of the opinion. No difference exists to give color to an argument in support of an implied power, such as is inferred. Both are merely local governmental bodies to perform those local duties which the general legislative power cannot attend to. In nature they are the same, though differing in the extent and ends for which their powers are conferred. Neither can exercise a merely discretionary, or a merely commercial, or business power, not conferred by a legislative grant, for both are the mere creatures of the law, for government, and not for business purposes.
A power to issue at discretion an unlimited amount of commercial paper, not to actual creditors, but designed for the market, or for private investment, is not in its nature a municipal function or local governmental act, but is a mere business or commercial act, and if the councils can issue $645,000 or $445,000 beyond the legislative grant of power in this case, they can issue as many millions. They were not elected to exercise any such power; they do not represent the people for any such purpose, and they ought not to be intrusted with any such wild discretion.
Again, the doctrine of the opinion is contrary to the genius of the people and the spirit of their constitution. It was doubted at first whether even the legislature could constitutionally confer powers beyond those simply .municipal, and when the case of Sharpless v. Philadelphia and kindred cases sustained the legislative power the people straightway interfered, and the series of amendments of 1857 curtailing this power was adopted. Since that time the people have again spoken in emphatic terms in the new constitution of 1873, further curtailing both legislative and municipal power. Yet this opinion by a stroke of the pen clothes the councils of cities with a sweeping authority drawn from inference and unlimited by law, by which the people of all our cities, great and small, are left at the mercy of ringsters, jobbers and plunderers. Will no example bid us shun this vortex of corruption ? How long is it since this city of Pittsburgh, wherein we sit, has suffered losses by the issue and improper manipulation of its bonds of such magnitude its credit staggers under the load. What body, public or private, is safe from the machinations of dishonest men ? It is but a few days since the city of Philadelphia has been thrown into wild consternation by a fraud of such dimen
Another fact is noticeable. Left without time for examination, I cannot state it as a known fact, yet from my general recollection of legislation, and the policy of the state, I believe it to be a fact that a power to borrow money by the issue and sale of negotiable bonds, payable to bearer, with or without coupons, has never been known to exist in any city except by special legislative grant. In the opinion, the example of the city of Philadelphia is referred to upon the power to borrow money, which, as I have shown, is measured and limited by the contract of loan, and therefore not within the case under discussion. If, however, there has been any departure in that city, I can only say that a calculation for the meridian of Philadelphia is wholly unsuited to the rest of the state.
Of course I cannot, in this hasty effort, examine the judicial decisions referred to, but I venture to assert that the real weight of judicial opinion is against the doctrine of such implied power, and that the cases cited in its support are chiefly those where the bonds or instruments in question were issued to actual creditors, or for debts actually contracted. Looking at the interests of the people and the genius of their institutions, ours should be the duty of restraining the capability of mere public servants to rob the people, instead of giving it wider scope for injury.
There is much more that ought to be said, and which might be better said than it can be in this work of a night. But, hasty as it is, I feel it an incumbent duty to put on record my dissent from a doctrine fraught with so much danger, resting on such slender grounds of implication, and opposed by so much respectable authority.
I hold, therefore, that a public corporate body, created by law for merely governmental purposes, has no implied power to issue negotiable bonds to raise money either in the open market or by sale to individuals for investment, at the mere will or discretion of the city councils, unauthorized by Act of Assembly, and unlimited in amount or in price. It is not a known municipal power, but one of the most dangerous kind, and I dissent, therefore, from a decree which places the bastard issues on the same plane of right as the issues for actual indebtedness for proper municipal purposes. The case before us calls for a just discrimination between them, and the decree should have been so framed.
In reply to the addenda, it may be said the Act of 20th May 1874 is foreign to the question here. It is not retrospective and does not help the unlawful issue of these bonds. As to the future, while it is a restraining statute when a city debt is sought to be increased, it justifies no implication of the prior existence of the power to issue and sell negotiable bonds either in open market, or
Nor does the fact that the bonds, or rather the proceeds of them, may be applied to the various purposes stated in the conclusion of the opinion, justify the manner of issuing and selling them at the enormous discount shown by Table D. The application of sixty-three dollars received on a bond, to a lawful debt, does not atone for creating a debt of $100. It does not help the argument for an implied power to launch them out in the illegal manner stated; nor justify a sweeping decree to compel payment of the interest on the whole issue without discrimination.