New Orleans, Mobile & Chattanooga Railroad v. Dunn

51 Ala. 128 | Ala. | 1874

BRICKELL, J.

The right of property-holders, or taxable inhabitants, to the aid of a court of equity to prevent a municipal corporation and its officers from usurping powers, or violating duty imposed by law, whereby the burdens of taxation will be increased, is recognized by authority, and supported by principle. Municipal corporations are public corporations, and may not be so completely subjected to the jurisdiction of a court of equity as private corporations; yet, the powers with which they are clothed are to be exercised for the benefit of those residing within the territorial jurisdiction, and the officers exercising these powers may well be regarded as quasi trustees. A court may not intervene to prevent them from exercising, or to control the discretion with which they are of necessity intrusted, while within the line of their prescribed powers. It can and will interfere, to prevent them from exceeding these powers to the prejudice of the body corporate.

The point of controversy has not been as to the existence of the jurisdiction of a court of equity, but as to the proper party to invoke its exercise. Some authorities maintain, that it cannot be invoked by one or more tax-payers, unless the wrong complained of is attended with some special injury to them ; that where the wrong is a violation of public duty, affecting alike all the inhabitants of a municipality, the aid of the court must be invoked by the attorney general, or other proper officer, in the name of the State. Otherwise, it is said, each taxable inhabitant could institute a suit, and the decree in the one suit would not bind the parties to the other; and thus a multiplicity of suits would be engendered and encouraged, and litigation indefinitely protracted. The irresistible weight of modern authority sustains the right of an individual tax-payer, suing in his own name, or on behalf of himself and others having a community of interest, who may make themselves parties complainant, to the aid of a court of equity, to prevent or avoid illegal corporate acts, whereby the burdens of taxation will be increased. In its practical operation, this principle has not resulted in the multiplicity of suits and the continuance of litigation, which was apprehended. The matter of dispute has been generally settled as finally, if not as conclusively, by one such suit, as it would have been by a suit in the name of the State, at the instance of the attorney general. The remedy is simple, expeditious, and preventive of the abuse of corporate powers. ’ The various authorities are collected and reviewed by Judge Dillon, in his excellent treatise on Municipal Corporations; and he approves the modern rule. Dillon on Mun. Corp. §§ 731-37. Though the question does not seem to have been directly passed upon, and expressly decided by this court, there are numerous decisions collected on the brief of the counsel for the appellee, in which the right of a tax-payer to maintain such suit has been so often recognized that we can scarcely regard the question as open. The complainants have pursued an appropriate remedy, and are entitled to the relief sought, if the corporate acts proposed are violations of duty, or usurpations of power by the corporate authorities.

2. The charter, or act of incorporation of the city of Mobile, does not materially vary from the charter of municipal corporations generally, either in the character or extent of the corporate powers conferred. The city is declared a corporation, under the name and style of the “ mayor, aldermen, and common council of the city of Mobile,” with the right of, and subject to suit by that name, and with capacity to take, hold, and dispose of property, real and personal. The territorial boundaries of the city are defined and prescribed. The powers of the mayor, aldermen, and common council are specifically enumerated. Among these are the powers to levy and collect taxes ; to purchase, and provide for the payment of the purchase-money, such real and personal property, as may from time to time be deemed necessary and proper for the use, convenience, and improvement of the corporation; to construct gas-works, and water-works, for the purpose of furnishing light and water to the inhabitants of the city; to carry out the system of wharf-age in the city, and to obtain control, by contract or purchase, of wharves and wharf property of the city, and, if necessary, to issue city bonds, bearing interest, for purposes of the same ; to pave the streets at public expense, or by assessments on the owners of property located on the streets; and general police powers. Acts of 1865-6, p. 202.

Corporations, public or private, are of legislative creation. Municipal corporations are strictly of political institution. Legislative sanction is indispensable to their existence, and over them legislative power is generally unrestrained. They have no other capacity or power than that which is expressly conferred, or which is necessary to carry into effect the purposes of their creation. In the work to which reference has been made it is stated: “ It is a general and undisputed proposition of law, that a municipal corporation possesses and can exercise the following powers, and no others: First, those granted in express words; secondly, those necessarily or fairly implied in, or incident to the powers expressly granted; third, those essential to the declared objects and purposes of the corporation, — not simply convenient, but indispensable. Any fair, reasonable doubt concerning the existence of power is resolved by the courts against the corporation, and the power is denied.” Dillon Mun. Corp. § 55.

The proposed corporate act of which complaint is made, and which the court is asked to prevent by injunction, is the issue by the mayor, aldermen, and common council, of negotiable interest-bearing bonds of the city of Mobile, to the New Orleans, Mobile, and Chattanooga Railroad Company. These bonds are either a gratuity, a donation to the railroad company, or founded on no other consideration than the benefits it is expected will accrue to the city from the location therein of the machine and workshops of the company; the improvement of unoccupied real estate, and, in its improvement, the consequent drainage of a marsh or swamp, now noxious to the general health of the city. If these bonds should be issued, and become debts chargeable on the city in its corporate capacity, the only source of payment is taxation. The mayor, aldermen, and common council are clothed with the power of levying and collecting taxes on property, real and personal, and on various business pursuits and vocations within the city limits. The power of taxation thus conferred must be limited and confined strictly to the purposes for which the corporation is created. The revenues derived from the exercise of this power must be faithfully applied to these purposes. The corporate authorities cannot, without a violation of duty and a usurpation of power, appropriate the revenues thus produced to any other purposes or objects than such as are fairly expressed or reasonably implied in the charter. It is not material what is the character of the object, or how pressing the necessity, or what are the benefits, real or imaginary, which may flow to the city; if not within the purposes of the act of incorporation, there is a want of power in the corporate authorities. Invasion or destruction by a public enemy may be impending, but the duty of repelling the one, and of averting the other, is not within the corporate power, or a duty resting on corporate authority; and an appropriation of the corporate revenue to these purposes could not receive judicial sanction. The erection of houses of worship might beautify and adorn the city, and improve and elevate the moral tone of the community, but their erection does not lie within the province of corporate power. It may be that the location of the machine and workshops of this railroad company within the city would increase its business, introduce an industrious, enterprising element into its population, and afford employment to a number of its inhabitants more profitable than any they can now obtain ; but we do not find that the charter of the city contemplates the exercise of corporate power to accomplish these purposes, except as they may follow incidentally from the local government instituted by the charter from the protection and security it affords. If, therefore, the city bonds proposed to be issued are to be regarded as a donation or gratuity to the railroad company, to induce the location of its machine and workshops within the city limits, their issue is unwarranted, and should be restrained. Negotiable as they are proposed to be in form, if issued, the city might hereafter be embarrassed in defending against them when pressed as debts the city should pay. Though the defence would be complete, yet it would be embarrassing to the financial operations in which the corporate authorities may legitimately engage, if such a large amount of the bonds of the city were outstanding, apparently valid, and the invalidity of which could be pronounced only at the termination of litigation. We do not doubt that it is within the jurisdiction of a court of equity, and a duty, to restrain their issue.

The corporate authorities, doubtless, have power to construct the necessary sewers and drains within the city ; and it may be that the construction pf the buildings the railroad company would erect for its shops, depots, &c., and the grading and filling up of the vacant ground on which they propose to locate them, would incidentally improve the drainage of the city, and promote its healthfulness. This, however, could be said of any other improvement of the same ground. Such drainage is a mere incident to the reclamation of the ground to private purposes ; its extent and character is dependent upon private will. The power of the city to construct sewers and drains is to be exercised for the public benefit, and is coextensive with public necessity. It involves not only the duty of construction, but the duty of continuance and keeping in repair. No such duty would rest on the railroad company. The sewers and drains the corporate authorities may construct remain under corporate control, as do the streets and alleys of the city. The drainage incidental to the improvements made by the railroad company is, like the improvements, a matter of private property and jurisdiction. The proposed issue of these bonds cannot be supported as an exercise of the corporate power over the sewerage and drainage of the city, though these may be improved by the uses to which it is proposed to induce the railroad company to appropriate vacant real estate within the city-

3. The proposed ordinance authorizes the issue of negotiable bonds. These bonds are not to be issued in the exercise of any express corporate power, nor are they to be issued to enable the corporation to raise money to execute such power. In a single instance only is the corporation expressly authorized to issue interest-bearing bonds; and that is in the purchase of the wharves and wharf property of the city. The authority of municipal corporations to issue negotiable paper has been the subject of extended judicial discussion in this country, in recent years, and the decisions are far from being harmonious. Experience has proved that the exercise of such power has been fraught with evil to local communities, subjecting them to gross frauds, and entailing upon them heavy burdens, originating often in the corruption of their officers and agents, from which relief would have been certain, if it had not been for the form which the corporate obligation was made to bear. In the exercise of their express and incidental powers, these corporations may necessarily incur debts. Contracting a debt, and the making and delivery of negotiable paper as the evidence of such debt, seem to us distinct and independent, the one not necessarily including the other. At one time, though the capacity of an infant to bind himself for necessaries was as large as it now is, his negotiable promissory note was deemed void. The corporate contract, when it does not assume the form of negotiable paper, stands upon the same footing with the contracts of individuals. Whoever seeks its enforcement, takes the contract cum onere — with all its defects, and subject to all the defences which spring out of the transaction, and which could have been urged by the corporation against the party with whom it was originally made. If, in the exercise of the express corporate power to purchase real or personal property, a purchase is made on credit, and the corporate obligation, not negotiable in form, is issued for the purchase-money, a failure of the vendor’s title, or a breach of his covenants of warranty, or a fraud practised by him, may form a full defence to the payment of such obligation, and justify the rescission of the contract of purchase, and the cancellation of the corporate obligation, without regard to who is the holder, or the consideration on which he acquired it. If the obligation is negotiable in form, and passes into the hand of a bond fide holder, the protection the law extends to commercial paper will cut off all such defences, and fasten upon the corporation a liability for which it has not received a corresponding benefit or consideration.

If we could reach the conclusion that the corporation had power to make the donation to the railroad company, or to give them the bounty which this ordinance proposes, we would feel constrained to declare that it could not be made to assume the form and characteristics of negotiable bonds. A municipal corporation, clothed with the express power of borrowing money, or other similar power, may or may not take, as incidental or implied, the capacity to issue negotiable paper. But the corporation 'of the city of Mobile, in the exercise of no power expressly conferred, takes such implied or incidental power. Other means, better adapted to the execution of the corporate powers, and less hurtful to the inhabitants of the city, can be found for the consummation of all corporate purposes. The evils attendant on the issue of negotiable corporate obligations are so manifest, and have been so grievous, that they form, in themselves, a sufficient reason for the adoption of this principle, and it is supported by the highest judicial authority. Police Jury v. Britton, 15 Wall. 566.

The decree is affirmed, at the costs of the appellant, the said New Orleans, Mobile, and Chattanooga Railroad Company.