Commonwealth ex rel. Whelen v. Select & Common Councils of Pittsburgh

88 Pa. 66 | Pa. | 1878

Lead Opinion

Mr. Justice Paxson

delivered the opinion of the court, November 18th 1878.

The Act of 2d April 1870, entitled “An act to provide for the improvement of Penn Avenue, and other avenues and streets in the city of Pittsburgh,” Pamph. L. 796, bears upon its face, the evidence that the legislature intended a system by which the city of Pittsburgh should be enabled to extend its streets and avenues from time to time, as required for its convenience or pleasure. The immediate occasion of the passage of the act, was probably the large extension of the city limits by the Act of 1867. Said extension embraced a considerable amount of strictly rural territory, used and cultivated for the most part as farm lands. It was considered desirable, during a period of inflation, and in the midst of expanding values, to open broad avenues.for miles through these farms, to grade down hills, fill up ravines, and curb and pave the avenues in a costly manner. The Penn Avenue Act may be regarded as the result of this condition of things. We will not stop to discuss its wisdom. It is enough to say it was passed with all the forms necessary to a legal enactment, and its 25th section provides that said act should not take effect “until the councils of the city of Pittsburgh shall have approved thereof.” The city councils having approved of it, and proceeded to act under it in the opening of its avenues, the city must be held to the full measure of its legal responsibility therefor.

Without going into unnecessary detail the principal features of the act are those providing for the election of commissioners by the owners of property abutting on the street to be improved, whose duty it is declared to be to control and superintend the grading, curbing and paving; the payment of the cost of the work from the proceeds of sales of bonds of the city; the assessment of the cost upon the abutting property, which was made payable in ten equal annual instalments, with seven per cent, interest, thereby creating a fund to be applied under the direction of the finance committee of councils, to the payment of interest on, and the redemption of the bonds. Under the system thus briefly sketched, Penn Avenue and several other streets and avenues have been graded and paved, and bonds of the city, amounting to over $5,000,000,-have been sold in the market, the proceeds paid into the city treasury, and drawn out upon the orders of the commissioners, in payment of the cost of the improvements referred to. Eor several years the city paid the interest upon these bonds with promptness, but defaulted for the year 1877, and has paid no interest since.

The relator, Henry Whelen, is the owner of $9500 of these bonds, and is the agent of several corporations and individuals, who are large holders of the same. In February 1878 he presented his petition to the court below, praying the said court to award a writ of alternative mandamus, commanding the councils of said city to show cause why they should not provide for the payment of the interest. To the writ thus granted, a majority of the councils made a return denying the liability of the city upon the bonds. The relator filed a demurrer to the return. The president judge 'of the court below, being the owner of some of the bonds, declined for that reason, to sit at the hearing. The remaining two judges differed in opinion. In order, however, that the case might be brought to this court, they entered judgment for the defendants, and refused the writ of peremptory mandamus. To the judgment thus entered this writ of error was taken.

That the writ of mandamus is a proper and appropriate remedy in such cases is settled law. We need only to refer to Commonwealth ex. rel. Hamilton v. The Councils of Pittsburgh, 10 Casey 496; Commonwealth ex. rel. Middleton v. Commissioners of Allegheny County, 1 Wright 237; Commonwealth ex. rel Armstrong v. Same, Id. 277; Von Hoffman v. The City of Quincy, 4 Wallace 535; Perkins et al. v. Slack, 5 Norris 270. The relator having selected the proper remedy it remains to be seen whether ho has shown such a case as entitles him to the writ. That the facts set forth in his petition establish a prima facie case is too clear for argument, and must prevail unless the defendants have set out such matters in their return as relieve them from responsibility.

We need not go over in detail the grounds of defence specified in their return. They may be reduced to two heads: 1st. That the bonds issued under the Act of April 2d 1870 (Penn Avenue Act) and its supplements, do not constitute part of the funded debt of the city of Pittsburgh; that the holders of said bonds are bound to look for the payment of interest thereon, and to become duo, to the assessments made under the provisions of said act upon the properties abutting upon the streets and avenues improved; and that no authority or power has been given or delegated to the councils of the city to levy a general tax, or any tax, to pay the interest on said bonds, or to apply any moneys out of the general revenues of the city for that purpose. 2d. That the bonds in question were issued in disregard of that provision of the Constitution which limits the debt of the city; and on the requisition of commissioners, without any previous appropriation made for their payment by councils, as required by the Constitution. We will consider these propositions in the order in which they are stated.

The first material question is, are the bonds in controversy the bonds of the city of Pittsburgh, apd for which the city is directly liable to the holders for the payment of both principal and interest ? That they are so in form is manifest. They purport to be the bonds of the city; are signed by the mayor and controller, countersigned by the Penn Avenue commissioners, and have the corporate seal affixed. And for the true and faithful payment of the sum of money mentioned in each bond, and the semi-annual interest thereon as aforesaid “the faith, credit and property of the city of Pittsburgh” are therein solemnly pledged. So that if the bonds were issued by authority of law, upon a sufficient consideration, there can be no doubt but that they are the bonds of the city. No question has been made as to the consideration. It is not denied that the holders paid par for them in good money, and that the proceeds went into the city treasury. Were they issued in pursuance of law? It is admitted that they were issued under section 12 of the Penn Avenue Act, which section is as follows: “For the purpose of providing for the payment of the cost and expense of said improvements the said commissioners shall be authorized from time to time as the work progresses, to make requisition upon the mayor of the city of Pittsburgh for the issue of bonds of said city, in such sums as they deem best; and it shall be the duty of the said mayor to make and execute bonds in the name of said city to an amount not exceeding the amount of the contract price for said work, and the incidental expenses attending the same; said bonds shall be known as Penn Avenue bonds; they shall be signed by the mayor and countersigned by the controller, and sealed with the corporate seal of said city; they shall be all of the same date, and they shall be payable twelve years after date, and redeemable at any time, at the option of said city; they shall bear interest at the rate of seven per centum per annum, payable semi-annually from date, principal and interest payable at the office of the treasurer of the city of Pittsburgh ; the said bonds shall be free of taxation.” Every street or avenue improved under the Penn Avenue Act and its supplements, was so improved by virtue of an ordinance of the city councils directing the grading and paving thereof in accordance with the provisions of said acts, and authorizing the election of commissioners by the owners of the abutting properties. Each bond issued by the city has a recital of the ordinance authorizing the improvement of the street or avenue for which it was issued. The contract for each improvement was made in the name of the city, and the security for the faithful performance of the work was in each instance given to the city. Here, then, we have the case of bonds issued in the name and under the corporate seal of the city, the proceeds of which went into the city treasury and were drawn out upon orders for the payment of the debts of the city, lawfully contracted in the course .of its municipal improvements. That all this was done through the interposition of a commission, amounts to nothing. That such commissions created by the legislature may lawfully bind a municipality, was expressly ruled in' the City of Philadelphia v. Field, 8 P. F. Smith 320. But these commissions, if not created by the direct action of the city councils, were certainly raised up with their consent. We need not argue that a municipal corporation may give its bond or other evidence of indebtedness for a debt lawfully contracted in the proper performance’ of its municipal duties. That question is settled by Commonwealth ex rel. Reinboth v. The Councils of the City of Pittsburgh, 5 Wright 378; City of Williamsport v. Commonwealth ex rel. Bair, 3 Norris 487.

It. was urged, however, • that notwithstanding the fact that the bonds were issued by the city, and upon their face pledge the faith and credit of the city for their payment, yet that the holders must look for the payment of their interest to the street assessments upon the properties abutting upon the avenues. There is nothing in the case to indicate that such was the understanding or agreement of the parties at the time the bonds were sold. On the other hand, there are persuasive reasons to show that it was not. These bonds were sold at par. The 14th section of the Act of 2d April 1870, required that they should be sold at not less than par. That they could have been disposed of at par, or indeed for any considerable sum, had it been known that the holders were to look for payment to the municipal assessments upon abutting property, is a proposition too absurd for discussion. It is not alleged that the city at any time, or at any place, gave notice to anybody that these bonds, though issued by her over her corporate seal, were payable out of street assessments. It is true, each bond contained the statement that it was issued for the improvement of a certain avenue, in pursuance of the before-recited Act of 2d April 1870. It is conceded that the bondholders are bound by the terms of that act, for the reason that it is the authority upon which the bonds were issued. But I have looked in vain through the act for anything to show even a glimmering of legislative intent that the bondholder should look to the street assessments for his pay. Such a provision, if apparent upon the face of the act, must necessarily have rendered it wholly abortive. The whole plan depended upon the ability of the city to borrow the necessary amount of money. In construing this act, therefore, we are not to assume that the legislature intended to do that Avhich Avould entirely defeat the object of the act itself. We do not regard it, however, as of doubtful interpretation. It clearly makes the city responsible. By the 12th section, as well as by the express terms of the bonds themselves, the city is to pay the interest semi-annually from the date of the bonds, whereas by the 18th section, the first instalments of the assessments are not payable until the first day of October succeeding the time of the assessment. By section 16 the assessment is not to be made until after the improvement is completed; and the basis for the assessment is the amount of the bonds previously sold. By section 22 it is provided that “ all-moneys received from assessments shall bo appropriated, under direction of the finance committee of the councils of the city of Pittsburgh, to the payment of the interest, and the redemption of the bonds which may be issued for said improvement; if any interest shall become dub on said bonds, when there is no fund from which to pay the same, the councils of the city of Pittsburgh shall be authorized to make a temporary loan for the purpose of paying the same.”

Surely, it was never heard that an Act of Assembly authorized the councils of a city to make a temnorary loan to enable them to pay money which the city did not owe. An examination of these sections, as well as the entire scope of the act, leads us irresistibly to the conclusion that the legislature did not intend that the bondholders should depend for the payment of their interest upon the street assessments. Had such been the intention of the legislature, it would have been expressly so provided. Grood faith to the bondholders required that they should have been told so in explicit terms.

The system of municipal assessments is not new. It has been in use for a long time, and is well understood. Streets are being constantly paved and sewers constructed, the cost of which is by authority of the legislature assessed upon the abutting property. Yet it has never been held that the city contracting for such work can turn the contractor over to the property owners for his pay, unless he agrees to look to them for payment. The plain object of the provision in the Penn Avenue Act for the assessment of the cost of the street improvements upon the abutting properties, was to provide a fund out of which the city should be reimbursed, in whole or in part, for the outlay. The bondholders have nothing to do with it. They have no contract relation with the property owners as such, nor have they any right to enforce the payment of the assessments.

If the bonds in question are bonds of the city, then the duty of the city councils to include the interest as it accrues in the annual appropriation ordinance, and to provide for its payment by a levy of sufficient taxes, is clear. Section 3 of the Act of 6th April 1850, Pamph. L. 407, makes it the duty of councils to assign and appropriate the revenue of said city derivable from all sources, and in case of a deficiency, preference shall be given to the payment of the interest on the funded debt of the city. The Act of April 15th 1867, Pamph. L. 1258, removes all limitations and restrictions contained in prior Acts of Assembly, upon the power of the city to raise money by a tax levy to pay the interest upon the city debt and for other city purposes; while the tax rate is to be adjusted so as to meet the liabilities of the city. The second section of the Act of 19th of March 1873, Pamph. L. 317, provides “that the councils of the said city of Pittsburgh shall hereafter make the appropriations during the month of January or February in each and every year, in the manner prescribed by the said Act of April 6th 1850.” This act (19th of March 1873) was after the Penn Avenue legislation, and after the issue of bonds thereunder had commenced.

A further objection was made to the bonds, that they were issued in violation of art. 9, sect. 8, of the Constitution, limiting the debt of municipal corporations. It is a sufficient answer to this to say, that the section of the Constitution referred to does not apply. It is prospective in its operation. The same remark may be made in regard to the further objection, that the bonds were issued without any previous appropriation made for their payment by councils, as required by the present Constitution. It appears from the return that $2,134,600 of the bonds were issued prior to the 1st of January 1874. The remainder were issued after that date. But we gather rom the record that the contracts for the improvements for which the later bonds were issued, were entered into prior to January 1st 1874. It was the contracts that increased the debt of the city. The issuing of bonds to raise money to pay the liabilities of the city under the contracts, was but the exchanging of one form of indebtedness for another. It did not increase the debt. That the sections in the Constitution invoked by the defendants do not apply to their case, we think is settled by Lehigh Iron Co. v. Lower Macungie Township, 31 P. F. Smith 432; Watson v. Chester and Delaware River Railroad Co., 2 Norris 254; Indiana County v. Agricultural Society, 4 Norris 357; Perkins et al. v. Slack, 5 Id. 270.

We are all of opinion that the bonds in controversy are the bonds of the city of Pittsburgh, and a part of its funded debt; that they were issued by lawful authority and for a sufficient consideration; and that honor, good faith, and the law of the land alike require that the city should provide for their payment.

The judgment is reversed, and judgment is now entered for the relator upon the demurrer; and it is further ordered that a writ of peremptory mandamus issue to the Select and Common Councils of the city of Pittsburgh, commanding said councils to forthwith make full and ample provision for the payment of all interest now due on said bonds, and the interest as it shall become due; and further cofnmanding the said councils to assign and appropriate out of the revenue of the said city, derivable from all sources, sufficient moneys for the payment of the interest of the funded debt of said city, so as aforesaid in arrear, and to become due, giving preference, if any deficiency should arise, to the payment of said interest before the payment of salaries of city officers and the ordinary current expenses of the city.

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Concurrence Opinion

Chief Justice Agnew

filed the following concurring opinion:

I concur in the judgment of this case. I think the entire Penn Avenue Act bears conclusive evidence of the intent of the legislature that the money for the immediate construction of the avenue should be raised by loan on the faith and credit of the city, and then that the city should be reimbursed by assessments upon the property-holders, payable in annual instalments. The only evidence the lender of the money has for his debt is the bond of the city, and this was to be issued by the city, through her proper officers. The law is the express authority for the debt, and the bond-holder had no other security. He has nothing to do with the assessment in any form, and nothing to do with its collection. It formed an inducement to make the loan, because it would put the city in the possession of the means of payment, but it was not made even as a collateral security in the hands of the lender himself. He cannot control it.

The decision in Seely’s Case, 1 Norris 360, was against the legality of the assessment, on the ground that the charge per foot front was a gross and palpable violation of the taxing power, and has nothing to do with the question before us now. That pertained to the relation between the city and the property-owners — this to the relation between the city and her creditors, the lenders of the money.

But the learned judge who delivered the opinion of this court refers to the Williamsport bond case as if it had some bearing on this case; and I notice that an impression is created that it has. This dictum, and consequent impression, make it necessary that I should distinguish this case, otherwise I could not concur.

I shall not repeat what I said then, but shall merely state the points in which that case differs. There the law gave authority to issue bonds only to the sum of $200,000. The officers of the city actually issued and delivered an excess over this sum of $450,000, or $650,000 in all of negotiable bonds, and sold them at various rates of discount, from thirteen to thirty-seven per cent. This over-issue was justified upon an implied power to issue them in payment of debts — a doctrine in my judgment founded in no authority of law, and subversive of the right of property and the welfare of the people. It is unfounded also in any authority derived from the people, who are represented in, a municipal corporation, a public body, only to the extent that the laws creating the municipality confer power upon the officers elected to carry out the law. These laws convey the only authority of the people, whose officers are not agents, but persons elected to perform legal duties.

At the time when that decision was made, the city of Philadelphia had a floating debt exceeding eleven million dollars. If by. a mere implication from the creation of a debt for ordinary corporate purposes, a power can be inferred to issue negotiable bonds to be sold in the market to raise money, on terms determined by the city councils, I see no reason why the councils may not, under the Williamsport decision, fund the whole of the floating debt, and as that city raises less revenue than her expenditures, why this funding process may not go on for ever, ór at least until the maximum allowed by the new Constitution shall be reached; or it comes into conflict with some other provision. This was the latitudinarian doctrine, to which I objected in the Williamsport case, and to which I would again object, if it were in this case.

This brings out as fully as I think it necessary, in a short opinion, the difference between the two cases. Here, Pittsburgh, by the Penn Avenue Act, is expressly authorized and commanded to issue her bonds for the money to improve the avenue. There Williams-port had authority to issue only §200,000 in city bonds, and an over-issue of §450,000 (it might have been so many millions so far as the question of power is involved), was defended on the ground of an implied authority. The difference is plain. Hence, 1 concur here because of the express authority of law, while I dissented there because of the want of this authority.