31 Pa. 185 | Pa. | 1858
The opinion of the court was delivered by
The bill of the complainants prays that the City of Philadelphia, and the Select and Common Councils thereof, may be restrained by the injunction of this court, from proceeding under the provisions of a certain Act of Assembly of this Commonwealth, passed on the 20th of April 1858, entitled “ A Supplement to the Act to incorporate the City of Philadelphia;” and from any attempt to invalidate the trusts now existing in the present Trustees of the Philadelphia Gas Works, or the security of the holders of the gas loans, or the system under which the said trusts have been heretofore conducted; or from attempting to change the mode by which the board of trustees has heretofore been elected and constituted, and also from increasing or changing the number of said trustees from their present number of twelve. The bill also prays that the existing trustees may be enjoined against admitting into their board any persons who may be elected under the said Act of Assembly, and against permitting any such persons to
The cause was heard upon bill and answer, before a single judge sitting at Nisi Prius, and an injunction, as prayed for, was granted against the present trustees. An injunction was also decreed against six persons elected under the above-mentioned Act of Assembly (they having been made parties to the bill), restraining them from acting as trustees of the said Philadelphia Gas Works, and from intermeddling, interfering, or participating with or in the said trust, or the business of the said board, or the conduct of the said Philadelphia Gas Works. From this decree the defendants have appealed.
The answer admits all the material facts charged in the bill, and thus the following case is presented.
The Philadelphia Gas Works originated in an attempt by the city councils to create a quasi corporation, by an ordinance passed on the 21st of March 1835. By the terms of that ordinance, persons were authorized to subscribe to a stock capital amounting in the aggregate to $100,000, and pay their subscriptions into the city treasury. The subscribers were to receive certificates for their stock, which entitled them to the profits arising from the manufacture and sale of gas. The ordinance expressly stipulated, that the city should not be liable for anything beyond the amount received from the subscribers. It also provided, that the gas works should be under the exclusive management of twelve trustees, who should be elected by the Select and Common Councils of the city, each council electing one-half; and the term of their office was so arranged, that one-third of the members of the board should be elected each year. The city also reserved the right, at any time when the Select and Common Councils might deem it expedient, to take possession of the works and convert the stock into a loan redeemable in twenty years, with interest payable semi-annually. It would seem to have been the purpose of the city, to cast upon the stockholders all the risk of the enterprise, reserving to itself the right to take the property if it should turn out profitable. Under this ordinance, the necessary stock was subscribed and paid, the trustees were elected, and the works constructed. The enterprise proved successful, and the demand for gas increased beyond the ability of the trustees to supply with their limited capital. To meet this state of things, subsequent ordinances were passed, from time to time, authorizing loans for the extension of the works. They provided that the money should be borrowed by the city, on the requisition of the trustees of the gas works, and that city certificates should be issued to the loanholdcrs. The faith of the city, and also the property of the gas works, were pledged for the repayment of the loans. A sinking fund was also created out of
The complainants are the holders of these loans; of that created by the ordinance of June 17th 1841, and of others under subsequent ordinances, passed severally, May 25th 1848, March 15th 1849, January 10th 1850, and March 20th 1851.
On the 20th day of April 1858, an Act of Assembly was passed, which enacted in these words: “ That the Select and Common Councils of the City of Philadelphia, are authorized and directed to elect six additional trustees of the Philadelphia Gas Works; each council shall elect three of said trustees, at the last stated meeting in April, A. d. 1858.
“ Section 2d. That the said six trustees, after their election, shall meet and divide themselves into three classes; the first class shall serve until February 1861; the second class until February 1860; and the third class until February 1859. Provided, that hereafter the election of said additional trustees shall occur at the same time that the law now provides for the election by councils. That is to say, that in January 1859, six trustees of said Philadelphia Gas Works shall be elected, and so likewise annually thereafter; and all laws inconsistent herewith be and the same are hereby repealed.”
Under this act, the bill charges, and the answer admits, that the city councils are about to elect six additional trustees, (which has since been done), and the complainants aver that the enactment is in violation of the constitutions of this state and of the United
It is obvious that if electing six additional trustees in the manner proposed, and constituting them a part of the board, is a violation of the .contract which the city has made with the loan-holders, then the Act of Assembly authorizing such election is in direct collision with the constitution, and the injunction ought to remain. The defendants are bound by their engagements, whatever they were, and no statute can relieve them from strict performance. The obligation of their contract does not depend upon the statute. It is antecedent, and superior. The constitutional prohibition was not designed to make contracts any more sacred from violation by the contracting parties than they were before its adoption. Its only purpose was to prevent their being made less sacred.
Nor can there be any doubt that the trust existing in the trustees is a private one, and that the city of Philadelphia is to be regarded as a private corporation, so far as relates to its contract with the loanholders. It was not as a municipality that it dealt with them. As a local sovereign, it had no authority to enter into the business of manufacturing and selling gas, for its sovereignty did not extend to such subjects, any more than it did to almost any other manufacture. It is true, a municipal corporation is not bound by any engagement which prevents a discharge of the duties imposed upon it by its organic law, for the plain reason that such engagements are contrary to law. But when such a corporation engages in things not public in their nature, it acts, as a private individual, no longer legislates, but' contracts, and is as much bound by its' engagements as is a natural person. The distinction between public duties and private business is wide and obvious. It is, perhaps, nowhere better stated than by Chief Justice Nelson, in Bailey v. The Mayor, &c., of the City of New York, 3 Hill 531. In speaking of powers granted to a municipal corporation, he remarks, that “ regard should be had, not so much to the nature and character of the various powers conferred, as to the object and purpose of the legislature in conferring them. If granted for public purposes exclusively, they belong to the corporate body in its public, political, or municipal character. But, if the. grant was for purposes of private advantage, or emolument, though the public may derive a common benefit therefrom, the corporation, quoad hoc, is to be regarded as a private company. It stands on the same footing, as would any individual, or body of persons, upon whom like special franchises had been conferred.” The contract, therefore, whatever it was, which was made with
This brings us directly to a consideration of the obligation which the city of Philadelphia assumed in the third section of the ordinance of June 17th 1841. What has the city undertaken? What it has undertaken, the law requires should be performed. That law is the contract obligation. Having in the first and second sections created a sinking fund, and pledged it (together with the faith of the city), and all the property and income of the gas works, as security for the repayment of the loans authorized, and of the interest upon them, the councils provide in the third section for the custody and management of the pledge. To effect this, they stipulate that the works, the sinking fund, and all other funds belonging to the said works, in other words, all the hypothecated property, shall be under the control and management of a board of trustees, elected and constituted as theretofore, who shall pay no part of the funds or profit into the city treasury, but shall apply them in discharge óf the obligations undertaken to the loanholders. It can hardly be doubted, that the primary design of this stipulation was to keep the pledge entirely out of the hands of the borrower, and prevent the funds from being intermingled with other property of the city, and thus exposed to the hazard of expenditure for other objects than those to which it was exclusively designated. This may be a very valuable stipulation to the loanholder, and contribute largely to his security. It may, therefore, well be supposed to have entered largely into the consideration of the loanholder, when he advanced his money. By the ordinance, it was offered to him as a further security, and it cannot now be withdrawn.
But so long as a board of trustees is continued, with the powers which in this ordinance the city engaged they should have, there is no departure from this primary design. The contemplated separation of the trust funds from the general funds of the municipal corporation, is alike maintained, whether the board be composed of twelve or eighteen trustees. The ordinance of June 17th 1841, however, not only stipulated that the gas works should be managed and controlled by a board of trustees, but by a board of trustees, elected and constituted as heretofore. It is argued, that this amounts to an engagement that the board shall continue to consist of the same number of trustees as it had been composed of prior to the passage of the ordinance, and that only four shall be elected in any one year, except to fill vacancies. It may be well here to recur to the previous constitution of the board. As has already been seen, the ordinance of March 21st 1835, prescribed that the board of trustees should consist of twelve persons, whose term of office should be three years; that they should be elected by ballot; that two should be
This is precisely the view of the contract which we take now. And such being the obligation which the city assumed, no legislation can authorize a change in the election or constitution of the board of trustees. .
The decree of the judge at Nisi Prius is affirmed, and the appellants are ordered to pay the costs.