WOLFF v. NEW ORLEANS.
Supreme Court of the United States
October Term, 1880
103 U.S. 358
- As long as a city exists, laws are void which withdraw or restrict her taxing power so as to impair the obligation of her contracts made upon a pledge expressly or impliedly given that it shall be exercised for their fulfilment. Von Hoffman v. City of Quincy (4 Wall. 535) cited on this point, and approved.
- Although such laws be enacted, mandamus, to compel her to exercise that power to the extent she possessed it before their passage, will lie at the suit of a party to such a contract who has no other adequate remedy to enforce it.
- Meriwether v. Garrett (102 U. S. 472), distinguished.
ERROR to the Circuit Court of the United States for the District of Louisiana.
Mr. George S. Lacey for the plaintiff.
Mr. Benjamin F. Jonas and Mr. Henry C. Miller, contra.
MR. JUSTICE FIELD delivered the opinion of the court.
In March, 1876, the relator, Rebecca W. Wolff, recovered a judgment in the Circuit Court of the United States for the District of Louisiana, against the city of New Orleans, for the sum of $13,000. Execution was issued upon it and returned unsatisfied. She thereupon caused the judgment to be registered, under the act of the legislature of the State of 1870, known as Act No. 5, of the extra session of that year, to the provisions of which we shall hereafter refer; and then called upon the mayor and administrators of the city to pay it out of the contingent fund of the corporation, or, if it could not be paid in that way, to levy a special tax for its payment. The authorities having failed to comply with this request, she applied for a mandamus to compel them to pay it out of that fund or to levy a tax for that purpose, setting forth in her petition the recovery of the judgment, the issue of execution thereon, its return unsatisfied, and the refusal of the city authorities, as stated. An alternative writ was accordingly issued.
To this writ the city authorities appeared, and filed an answer to the petition, in which they admitted the recovery of the judgment, the issue of the execution, and its return unsatisfied, and set up that the judgment was recovered on bonds of
The relator demurred to the return of the respondents, but it would seem that when the demurrer was called, the case was submitted upon the pleadings and certain proofs which had been filed. The court decreed that the city authorities, exercising the discretion vested in them according to section 3 of Act No. 5, of the extra session of 1870, should appropriate from the money set apart in the budget or annual estimate for contingent expenses a sufficient sum of money to pay the judgment; but that if no appropriation be made by the common council of the city, the judgment should be paid according to its priority of filing and registry in the office of the controller, from the first money in the next annual estimate set apart for that purpose. The decree was accompanied by a provision that
The act which authorized the issue of the bonds, upon which the relator recovered judgment, provided that the railroad company should issue to the city certificates of stock equal in amount to the bonds received, and declared that the stock should remain “forever pledged for the redemption of said bonds.” It made no other provision for the ultimate payment of the principal, but provided that a special tax should be levied each year to pay the annual interest. It is contended that only to the stock thus pledged and the income from it were the bondholders to look for the payment of the principal. The same position was urged in United States v. New Orleans, 98 U.S. 381, on the application by the relator in that case for a mandamus to compel the city authorities to levy a tax to pay judgments recovered upon similar bonds, and was adjudged to be untenable. Id. The court held that the indebtedness of the city was conclusively established by the judgments recovered against it, and that their payment was not restricted to any species of property or revenues, or subject to any conditions. If there were any limitations upon the means by which payment of the bonds was to be had, they should have been insisted upon when the suits were pending, and have been continued in the judgments. The fact that no such limitations were there found was conclusive that none existed.
The court also held that if the question were an open one its conclusion would be the same; that the declaration of the act, that the stock which the city was to receive from the railroad company should remain “forever pledged for the redemption of said bonds,” only created a statutory pledge by way of collateral security for their payment, and did not release the city from its primary liability, and that the bondholder was not bound to look to that security, but could proceed directly against the city without regard to it.
The court further held that the statutes of the State restrain-
The views thus expressed dispose of the objections to the mandamus in this case, founded upon what is contained in the railroad act as well as what is omitted from it. Nothing new has been presented to our consideration to lead us to doubt the correctness of our conclusions. There is no occasion, therefore, to repeat the reasons upon which they were founded.
But counsel also urge in their argument against the granting of the mandamus, that the power of a city to levy a tax upon property for all purposes, judgments included, is limited by acts of the legislature to one dollar and fifty cents on every one hundred dollars of valuation, and that the amount thus raised is insufficient to meet the current expenses of the city and pay previous judgments of other parties. They repeat the averments of the answer, that there was no contingent fund of the city out of which the judgment of the relator could be paid, nor moneys to the credit of the fund for current expenses not otherwise appropriated. They cite the charter of 1870, which requires a budget to be made in December of each year, exhibiting the various items of liability and expenditure for the ensuing year, and the act of March 6, 1876, which limits the right of taxation upon property by the city to one dollar and fifty cents on every one hundred dollars of its assessed value. They also insist that the conditions on which judgments against the city are to be paid are prescribed in Act No. 5 of the extra session of 1870.
This last act provides that no writ of execution or fieri facias shall issue from any of the courts of the State to enforce the
The act further provides that in case the amount designated in the annual budget for the payment of judgments against the city shall have been exhausted, the “common council shall have power, if they deem it proper, to appropriate from the money set apart in the budget or annual estimate for contingent expenses, a sufficient sum of money to pay said judgment or judgments, but if no such appropriation be made by the common council, then all judgments shall be paid, in the order in which they shall be filed and registered in the office of controller, from the first money next annually set apart for that purpose.”
The respondents contend that, under these provisions, no judgment creditor can claim that his judgment shall be paid absolutely, for its payment is made to depend upon the conditions stated; or insist upon an appropriation in the budget for any fixed sum, for this is controlled by the limit of taxation and the amount of necessary expenditures to sustain the government of the city. The amount for judgments to be provided annually, they say, is to be fixed by the discretion of the common council in framing the budget; and this discretion is to be guided by the limit of taxation for all purposes, and the amount required for police, lights, paving streets, public schools, and
The act of March 6, 1876, giving effect to what is known as the “premium bond plan,” does not hold out to the bondholder the delusive hope of payment in the distant future, which flitters around Act No. 5 of 1870; it cuts him off absolutely, unless he will accept the conditions of the proposed plan. It recites in its preamble that the total debt of the city, bonded and floating, exceeds $23,000,000; that the taxable property of the city has become so reduced in value as to require a tax at the rate of at least five per cent per annum to liquidate the debt; that a tax so exorbitant will render its collection impossible; that the continuation of a tax beyond the ability of the property to pay would lead to a further destruction of the assessable property of the city and to ultimate bankruptcy; and that the city has adopted a plan for the liquidation of its indebtedness, looking to the payment of its creditors in full, “obtaining thereby the indulgence necessary for the public well-being and the maintenance of the public honor.”
The plan proposed was an exchange of outstanding bonds for premium bonds; the latter to be of the denomination of twenty dollars each, bearing five per cent interest from July 15, 1875, payable at no designated period, the interest and principal to be paid at the same time and not separately, and the maturity of the bonds - principal and interest - to be determined by chance in the drawing of a lottery. One million of these bonds is to be divided into ten thousand series of one hundred bonds each. The ten thousand series are to be placed in a wheel, and, in April and October of each year, as many series are to be drawn as are to be redeemed, according to a certain schedule
For the interest on the premium bonds and other purposes of the city, the act provides that a tax of only one and one-half per cent per annum shall be levied; and this limitation of the taxable power of the corporation is “declared to be a contract not only with the holder of said premium bonds, but also with all residents and taxpayers of said city, so as to authorize any holder of said premium bonds to legally object to any rate of taxation in excess of the rate herein limited.”
It is plain that if the provisions of this act can be sustained as a valid exercise of legislative power, the judgment of the relator is practically annulled or rendered so uncertain of payment as to be of little value.
When the bonds were issued, upon which the judgment was recovered, the city was by its charter invested with “all the powers, rights, privileges, and immunities incident to a munici-
The argument in support of the act is substantially this: that the taxing power belongs exclusively to the legislative department of the government, and when delegated to a municipal corporation may, equally with other powers of the corporation, be revoked or restricted at the pleasure of the legislature.
It is true that the power of taxation belongs exclusively to the legislative department, and that the legislature may at any time restrict or revoke at its pleasure any of the powers of a municipal corporation, including, among others, that of taxation, subject, however, to this qualification, which attends all State legislation, that its action in that respect shall not conflict with the prohibitions of the Constitution of the United States, and, among other things, shall not operate directly upon contracts of the corporation, so as to impair their obligation by abrogating or lessening the means of their enforcement. Legislation producing this latter result, not indirectly as a consequence of legitimate measures taken, as will sometimes happen, but directly by operating upon those means, is prohibited by the Constitution, and must be disregarded - treated as if never enacted - by all courts recognizing the Constitution, as the paramount law of the land. This doctrine has been repeatedly asserted by this court when attempts have been made to limit the power of taxation of a municipal body, upon the faith of which contracts have been made, and by means of which alone
The case of Von Hoffman v. City of Quincy, reported in 4th Wallace, is a leading one on this subject. There the legislature of Illinois had in 1851, 1853, and 1857 passed acts authorizing that city to subscribe for stock of certain railroad companies, and in payment thereof to issue its bonds with coupons for interest annexed. Those acts authorized the city to levy a special annual tax upon the property therein, real and personal, to pay the annual interest upon the bonds, and required that the tax when collected should be set aside as a special fund for that purpose. The city failed to pay the coupons held by the relator for a long time after they became due, and refused to levy the tax necessary for that purpose. The relator thereupon sued the city and recovered judgment. Execution issued thereon being returned unsatisfied, he applied to the Circuit Court of the United States for the Southern District of Illinois for a mandamus to compel the authorities of the city to apply to the payment of the judgment any unappropriated funds they had, or, if they had no such funds, to levy a tax under the acts mentioned sufficient for that purpose. The court issued an alternative writ, to which the city authorities answered setting up an act of the legislature of the State, of November, 1863, authorizing the city council to levy a tax for certain special purposes, such as lighting the streets and erecting buildings for schools, and also a tax on all real and personal property to pay the debts and meet the general expenses of the city not exceeding fifty cents on each one hundred dollars of the annual assessed value thereof, and repealing all other laws touching taxes except such as related to their collection, or to streets, alleys, and licenses. And they alleged that the full
“It is well settled that a State may disable itself by contract from exercising its taxing power in particular cases. It is equally clear that where a State has authorized a municipal corporation to contract, and to exercise the power of local taxation to the extent necessary to meet its engagements, the power thus given cannot be withdrawn until the contract is satisfied. The State, and the corporation, in such cases, are equally bound. The power given becomes a trust which the donor cannot annul, and which the donee is bound to execute; and neither the State nor the corporation can any more impair the obligation of the contract in this way than in any other. The laws requiring taxes to the requisite amount to be collected, in force when the bonds were issued, are still in force for all the purposes of this case. The act of 1863 is, so far as it affects these bonds, a nullity. It is the duty of the city to impose and collect the taxes in all respects as if that act had not been passed. A different result would leave nothing of the contract, but an abstract right, of no practical value, - and render the protection of the Constitution a shadow and a delusion.” 4 Wall. 535, 554.
The prohibition of the Constitution against the passage of laws impairing the obligation of contracts applies to the contracts of the State, and to those of its agents acting under its authority, as well as to contracts between individuals. And that obligation is impaired, in the sense of the Constitution, when the means by which a contract at the time of its execution could be enforced, that is, by which the parties could be obliged to perform it, are rendered less efficacious by legislation operating directly upon those means. As observed by the court in the case cited, “without the remedy the contract may
The restraint upon the legislature, to the extent mentioned, by the contract clause of the Constitution, against revoking or limiting the power of taxation delegated by it to municipal bodies as the means of carrying out the purposes of their incorporation or purposes designed for their benefit, is a different matter from that of exempting property from taxation; and even in the latter case it has been adjudged in repeated instances that one legislature can bind its successors. The restraint in no respect impairs the taxing power of the existing legislature or of its successors, or removes any property from its reach.
These views are not inconsistent with the doctrine declared by the decision of the court in the recent case of Meriwether v. Garrett, 102 U.S. 472. There the charter of the city of Memphis had been repealed, and the State had taken the control and custody of her public property, and assumed the collection of the taxes previously levied, and their application to the payment of her indebtedness. The city with all her officers having thus gone out of existence, there was no organization left - no machinery - upon which the courts could act by mandamus for the enforcement of her obligations to creditors. The question considered, therefore, was whether the taxes levied before the repeal of the charter, but not paid, were assets which the court could collect through a receiver and apply upon judgments against the city.
Here, the municipal body that created the obligations upon which the judgment of the relator was recovered, existing with her organization complete, having officers for the assessment and collection of taxes, there are parties upon whom the courts can act. The courts, therefore, treating as invalid and void the legislation abrogating or restricting the power of taxation
Following the doctrine of Von Hoffman v. City of Quincy, we are of opinion that the act of March 6, 1876, the provisions of which we have stated, is invalid so far as it limits the power which the city possessed, when the bonds upon which the relator has recovered judgment were issued, to levy a tax for their payment. In thus limiting the power without providing other adequate means of payment of the bonds, the legislature has impaired the obligation of the contract between her and the city.
The judgment of the court below must, therefore, be reversed, and the cause remanded with directions to issue the writ as prayed in the petition of the relator; and it is
So ordered.
MR. JUSTICE HARLAN. I concur in the opinion just delivered, except the paragraph in which reference is made to Meriwether v. Garrett, 102 U. S. 472. The present case does not require us to determine any question as to the effect which the repeal of a municipal charter may have upon the rights of existing creditors. Nor do I wish to be understood as assenting to the correctness of the statement in the opinion as to what was involved and decided in Meriwether v. Garrett.