Warner v. City of New Orleans

87 F. 829 | 5th Cir. | 1898

SWAYNE, District Judge

(after stating the facts as abové). As to nearly all of these defenses, we might well rest our decision in this east' on the opinion of the supreme court expressed in answer to the certified question. All the facts averred in the bill have either been admitted by the answer, or abundantly established by evidence. Indeed, the only fact in dispute between the parlies is the question of responsibility for the alleged defects in the drainage plan. So far, however, as the answer attempts to fasten this responsibility on the canal company and Van Norden, its transferee, as a defense to this action, it is entirely unsupported by the evidence, as the counsel for the city very frankly admitted in their argumen t at the bearing. The general plan under which the work was undertaken by the contractor was prescribed by the legislature in the act of 1871, which directed the canal company to dig canals above, below, and in the rear of the city, and with the earth removed therefrom to build levees to protect the city from overflow, and to dig such interior canals as might be necessary for the drainage of tin; city and the lands in the rear; but the rigid: to prescribe the location and number of all the canals was expressly vested in the city. As a matter of fact, the city, through its ordinances, based on the recommendation of the city engineer, located each of the canals that were excavated, and exercised direct supervision over the work, which the assistant engineer having charge of the work says was done strictly in accordance with the specifications furnished by the contractor, and well done. The principal objections made to the plan by some of the eminent, engineers who have testified are that it was not sufficiently extensive to meet the future requirements of a growing city like Yew Orleans, that it did not provide; the number of interior canals necessary to bold and carry off the excessive rainfall, and that the method of discharging the drainage water by means of pumps into the lake was too expensive, and was wrong from a sanitary point of view. Testifying by the light, of experience and investigation made by them since 1871, they give it. as their opinion that a greater number of canals should be excavated than called for by the plan, and that the drainage ought to be discharged into Bayou Bienvenue, some distance below the city proper, through the main canal, by means of a series of pumping stations. Oilier engineers of equal reputation — notably, Mr. Bell, who, as engineer of the city in 1871, devised the plan now condemned, and the present city engineer, and others — testify that the plan was a good one, and. if carried out, would have accomplished the drainage of the city. The cost of completing the work after the city purchased the drainage plant, as testified to by some of the witnesses for the defendant, would have been about Spoilt),000, if’paid for in cash, and not in warrant's. But it now appears that a new plan of drainage; has recently been adopted, which, incorporating and using all the old works, is estimated to cost, about 88,000,000. Without commenting further on the evidence on this part of the defense», our conclusion is that the plan under which the work was done by the canal company and its transferee would, if carried out as contemplated, have sufficiently accomplished the drainage of the lands within the several districts to render the assessments available, if the city had kept the work in serviceable condition after its completion, as the law required. It is a singular fact that, while the answer in this case charges the failure of the drainage to the alleged defective plan and the work of the contractor, the principal ground of the decision in Davidson v. City of New Orleans, 34 La. Ann. 170, for annulling the judgment for one of these assessments, is that the city had abandoned the work, without any probability of renewing it, so that the work, in its incomplete state, was a detriment, rather than a benefit, to the lands. The failure of consideration which worked the destruction of the drainage fund was therefore, as adjudged by the supreme court of the state, caused directly by the fault of the city. Its conduct in this and other respects was a violation of its duty as a trustee, and was a breach of the covenant contained in the act of purchase, “not to obstruct or impede, but on the contrary to facilitate by all lawful means, the collection of the drainage assessments.” Treating the city, therefore, as a trustee, under an express duty to do whatever was reasonably required to make the drainage fund available for the purpose of paying the purchase warrants, a court of equity will apply the maxim “that equity looks upon that as done which ought to have been done.” “The true meaning of this maxim is that equity will treat the subject-matter, as to all collateral consequences and incidents, in the same manner as if the acts contemplated by the parties had been executed exactly as they ought to have been. * * * They are also deemed to have the same consequence attached to them, so that one party, or his privies, shall not derive benefit by his laches or neglect, and the other party, for whose profit the contract was designed, shall not suffer thereby.” 1 Story, Eq. Jur. § 64g. The city must therefore be treated as having done whatever was necessary to render the assessments available, and should be held to account for the drainage fund, as if collected and in hand.

It is claimed, however, that the city is not bound to account for the assessments and judgments against itself, as the quasi owner of the streets and other public places, on the ground that such assessments and judgments should be considered void ab initio, for the reason that public property is exempt from taxation. But we think the city, by drawing these warrants against the drainage fund, composed largely of these very assessments and judgments, is, under the principles laid down by the supreme court in the present case, estopped to deny their existence and validity, to the same extent that it is (‘stopped from setting up the issue of bonds under the act of 1872 as a discharge of its general liability as trustee with reference to the fund. As an original question, however, the authorities seem to affirm the liability of a municipal corporation for its proportion of the cost of local improvements, independently of the existence of any estoppel. In Re New Orleans Drainage Co., 11 La. Ann. 338, the supreme court of Louisiana held the city of New Orleans liable for assessments made on the area of the streets under the act of 1835, which is similar in all respects to the acts involved here, except that the assessments in that case had not been ratified by the legislature, as was done in this instance by the act of 1871. This case has since been commented upon and affirmed in Marquez v. City of New Orleans, 13 La. Ann. 319, and Correjolles v. Succession of Foucher, 26 La. Ann. 362, and in Paving Co. v. Gogreve, 41 La. Ann. 259, 5 South. 848. The matter of local assessments has been the subject of judicial inquiry in other states, notably by the supreme court of Illinois in the case of County of McLean v. City of Bloomington, 106 Ill. 209, where all the objections raised in this case have been elaborately considered, and decided in harmony with the case above quoted. Says the court in that ease:

“Thu objections may be included under three heads: First, that public property is exempt from special assessments: second, that the statute under which the state is proceeding does not authorize any assessments against ilie property of the county; third, that the judgment cannot be enforced by tlie sale of the property, and no other mode of enforcing such judgments can be resorted to. it is not claimed the first objection has the direct sanction of the statutes in its support, but the contention is such property is expressly exempt from taxation, and special assessments are included within iho meaning of the word ‘taxation.’ We have been too long and too firmly committed to tlie doctrine ihat exemption from taxation does not exempt from special assessments to now admit that it is even debatable. * * * Tlie distinction between taxation and special assessments is also clearly made in our present constitution, and while providing that the general assembly may exempt the property of the state, counties, and other municipal corporations from the former, makes no such provision in regard to the la iter, but on the contrary * * * authorized tlie general assembly to vest tlie corporate authorities of cities, towns, and villages with power to make local improvements by special assessments, without any restriction as t.o the properly to be assessed. Tlie second objection rests entirely on the assumption that, to include the property of counties, it should he expressly named, and that language, however comprehensive, In general terms only, is not sufficient. Tlie rule held by this court is directly the reverse of this assumption. Tin: exemption, and not the inclusion, must specifically appear. * * The question relates solely to the right of the state to apportion the public burden upon public properly, in common with private property, in proportion to tlie benefit conferred upon that property. The remaining question, wo think, involves no serious difficulty, although at first blush it may seem to do so. AVo certainly do not hold the court-house square may be sold, and title passed to private parties or to the city. In ’Taylor v. People, 66 Ill. 322. we held that in such cases the amount should be paid out of the treasury. The distinction here made between taxes and local assessments has been fully recognized by the supreme court of Louisiana in Charnock v. Levee Co., 38 La. Ann. 326. and in Paving Co. v. Gogreve, 41 La. Ann. 263, 5 South. 848, where the Drainage Case in 11 La. Ann. 338, is cited with approval.”

Whether the obligation for these drainage assessments had its origin in the original acts of 1858,1859,and 1861, or was east upon the city b,v the act of 1871, confirming the assessment rolls, upon which the city ivas named as a debtor, or results from judgments based on diese rolls, the amount of the assessments constitutes a lawful debt of the city, which must be discharged by the exercise of the power of taxation; such power being the usual', and in most instances the only, method by which municipal corporations can discharge their indebtedness. U. S. v. City of New Orleans, 98 U. S. 381; Wolff v. City of New Orleans, 103 U. S. 358.

It is urged, however, that the contracts of purchase made in 1876 are null and void, because they operated to increase the debt of the city, in violation of the amendment of the constitution of the state adopted in 1874. This assumption is based on the theory that assessments against the city were at that time void, and that to now enforce them would be to increase the city debt. It is said, also, that the city was not at that time the primary debtor for assessments against private property, and that, if the court should now impose a liability on the city for the dereliction of duty charged in the bill, it would create a new debt, which will come within the prohibition. We cannot concede the correctness of this argument. It is true the amendment prohibited any increase of the city debt after January 1, 1875; but it also expressly provided that it should not prevent the issue of drainage warrants to the transferee of the contract, under Act No. 30 of 1871, payable out of the drainage taxes. But it seems clear to us that by express terms the amendment excludes, and intended to exclude, from its operation, the liability of the city growing out of its relation to drainage matters, including the city’s liability as assessee of the streets and public places, as shown by the assessment rolls. Indeed, it would seem that the authority to issue warrants against the drainage fund after that date necessarily implied an affirmance of the right of the city to proceed to the completion of the drainage work then in progress, and imposed a corresponding duty on the city to collect and apply all the drainage assessments to the payment of the warrants. These taxes, being then liabilities of the city, cannot by any cause or reason be included in the clause prohibiting an increase of the debt of the corporation without imputing to the authors of the constitution an intent to defraud those who might deal with it under the invitation of the constitution. We cannot give to the organic law of the state a construction so repugnant to honesty and good morals; nor do we believe the legislature, in authorizing the city to purchase the property of the transferee of the canal company, nor the city, in making the purchase for the purpose of carrying on and completing the drainage, contemplated defraud: ing the vendor by invoking any such inequitable construction. Even admitting that the purchase created a debt in excess of the limitation, the most that can be said is that it was made in error of law, which, according to article 1846 of the Civil Code of Louisiana, cannot be alleged to acquire the property of another. This principle is embedded in the civil law, as shown by the learned disquisition of D’Auguesseau, to be found in the second volume of Poth. Obi. p. 350. The same principle is recognized by the supreme court in Railway Co. v. McCarthy, 96 U. S. 258, in which the court says that a corporation, having enjoyed the fruits of a contract fairly made, cannot, when called to account, deny the corporate power to make it.

The only remaining question which requires consideration is the plea of prescription, and that, we think, cannot be maintained. The act of sale created an express trust, in which the city undertook, as a trustee, to collect and apply the drainage assessments to the payment of the warrants given for the price of the property sold to it. This trust was a continuing and executory one, and the universal rule in such cases is that the statute of limitations is not set in motion until the trustee has disavowed the trust, and notice of his repudiation has been brought home to the cestuis quo h-ustent. Perry, Trusts, § 24; Lewis v. Hawkins, 23 Wall. 119. This rule has been expressly recognized and applied by the supreme court of Louisiana in Insurance Co. v. Pike, 32 La. Ann. 483, where it is held that prescription against the right to demand an accounting begins to run only from the date of the last act performed by the trustee with reference to the trust. In that case the act which vras held to be a recognition of the trust consisted of a credit entry, for money collected, made by the defendant in the books of the insurance company, of which he was 1 reasurer. In the present case the city alleges in its answer that it has constantly endeavored, by suits and otherwise, to collect the drainage assessments, thus affirming the trust, and has filed an account showing the collection of the assessments up to June 20, 1891, —only three years prior to the date of the bill filed. Notwithstanding (líese facts, it is still insisted that the judgments against the city are prescribed, under the laws of the state, because they have not been revived within 10 years since their rendition, even if the city has continued to act as trustee up to the time of the filing of the bill. We cannot understand upon what theory the city can claim a release from its indebtedness to the drainage fund by pleading its own neglect to revive the judgments, if the proceedings to revive were necessary to keep them in force. Such a pretension has neither the sanction of reason nor authority. On the contrary, the maxim, “Contra non valentem,” is universally applied as between a trustee and an estate represented by him. And so in this state it has been held that neither a claim of an administrator against the estate he represents, nor the claims of the estate against Mm, are subject to prescription, as long as he remains a trastee. In re Farmer, 32 La. Ann. 1037; McKnight v. Calhoun, 36 La. Ann. 408. The reason given by the court for the application of the maxim in these cases is that an administrator, from the very nature of things, cannot sue himself, if a debtor to the estate, nor sue the estate, of which he is the sole representative, if he is a creditor. Moreover, it is doubtful whether statutory assessments of the character in qnesiion are subject to any prescription at all. Indeed, the supreme court of the state has held in Reed v. His Creditors, 39 La. Ann. 115, 1 South. 784, citing State v. Jackson, 34 La. Ann. 178, and Davidson v. Lindop, 36 La. Ann. 765, that, tax laws being sui generis, the prescription of the Civil Code does not apply to them, from which it may be taken, as a general rule in such ma tiers, that, unless a law under which an assessment is levied provides a, limitation, none exists.

On a full consideration of the case, we think the decree appealed from should be reversed, and that a decree should be entered by the circuit court in favor of the complainant for the sum of'$6,000, with 8 per cent, interest from June 6, 1876, as stipulated in the warrants sued on, and that an account should be taken of all the drainage assessments, including those reduced to judgments against the city as assesr.ee of the streets, squares, and other public places, as well as (he assessments against private property and persons, allowing credits for the amounts heretofore collected and properly expended, but without allowing for the bonds issued under the act of 1872. Opportunity should be given the holders of outstanding purchase warrants of the character of those held by the complainant to come before the master on the invitation contained in the bill, and make proof of the amounts due them; and they should be admitted to share in the trust fund, upon offering to contribute to the cost and expenses of th'e litigation. In accordance with these views, and to prevent any unnecessary delay arising from a misunderstanding of the findings now and heretofore expressed by this court and the supreme court, the circuit court is directed to enter a decree as follows:

“(1) It is decreed that the city of New Orleans is a debtor to John G-. Warner, complainant, in the sum of $6,000, with 8 per cent, interest thereon from June 6, 1876, as stipulated in the warrants sued on, and that he is entitled to be paid said sum, in principal and interest, out of the drainage assessments set forth in the bill filed herein.

“(2) The said drainage assessments, including those against the defendant as assessee of the streets, squares, and public places, as well as those against the owners of private property, be, and the same are hereby, declared to constitute a trust fund- in the hands of the city of New Orleans for the purpose of paying the claims of complainant and other holders of the same class of warrants issued under the act of sale from Warner Van Norden, transferee to said city, under authority of Act No. 16 of the legislature of the state of Louisiana, approved February 24,1876.

“(3) That it be referred to one of the masters of the court to take and state an account of all said drainage assessments, and for that purpose he is authorized to require the production before him of the assessment rolls and other records appertaining to such drainage assessments, by any person having possession thereof, and to examine witnesses touching all such matters. In taking and stating such account the master is directed to charge the defendant ¿s well with the amount of drainage assessments against the city, the area of the streets, squares, and public places, as with those against the owners of private property, with interest thereon as prescribed by law, and to give credit only for the sums already collected and properly expended by the defendant in the execution of the trust, but that no offset be allowed for the bonds issued in exchange for drainage warrants under the act of 1872.

“(4) It is further ordered that said master give 30 days’ notice, by advertisement in a newspaper published in New Orleans, to all holders of warrants issued as aforesaid, to annear before him and establish their claims. And it is further ordered that said warrant holders be entitled to establish their claims before the master in the first instance, without being required to file formal interventions, or to obtain special leave of court, and that they be entitled, upon making satisfactory proof, to the full benefit of the proceeding.

“(5) It is further decreed that upon the coming in of the master’s report, and its confirmation, the complainant and all those who have established claims under the fourth clause of this decree will be entitled to an absolute decree against the defendant for the amounts found due them, if the fund established by the accounting shall be sufficient, but, if not sufficient to pay such claims in full, then for the proper pro rata thereof, and shall be entitled to have execution thereof. It is further ordered that the complainant and all other parties in interest have leave to apply to the court for such other and further orders as may be necessary, from time to time, to carry this decree into full effect, and that the defendant pay all costs of this suit.”

For the purpose of awarding the relief to which the complainant is entitled, the decree appealed from is reversed, at the costs of the appellee, with directions to the circuit court to enter the decree herein prescribed, and otherwise to proceed in the cause in accordance with this opinion.