Fidelity Insurance Trust & Safe Deposit Co. v. City of Scranton

Mr. Justice Gordon delivered the opinion of the court, March 5th 1883. The bond in suit was one of a number issued by the city of Scranton. It is dated June 1st 1873, and represents an indebtedness, on part of .the city to the holder, of one thousand dollars, payable twenty years from date, with interest at the rate of seven per centum per annum, “ payable semi-annually on the first days of December and June of each year, free of taxes for state, county or local purposes.” About the validity of this bond there is no dispute; the contention arises from that part of it, above cited, in which is found a covenant that the interest shall be paid free from all taxes. The learned judge of the court below, to whom this case was referred, held that this covenant-, so far as the state taxes were concerned, was void for the want of power in the city officials to make it. He says : “ The city of Scranton, at the time of issuing this bond, had no power to covenant to pay the state tax upon this bond. The charter of 1866 exempted $20,000 of the city debt from taxation for state purposes. It did not authorize the city to pay the tax. The Acts of 1870 and 1873 were to the same effect. By the Act of April 19th 1873, these exemptions were expressly taken away from city loans, not previously negotiated into the hands of innocent holders. At the time of the issuing of this bond, this repealing law was in force, so that, if the previous legislation could be construed to empower a city to covenant to pay a tax, the repeal, being as broad in language as the words implying the power, must be held to have repealed the power. It matters not whether the individuals of the city committee or the councils supposed they had the power, or supposed they were making a true representation ; if we are right in construing this as [393] a question of power, the true meaning of the law as it stands is the criterion of construction, and the evidence of the fact.” • With the conclusion thus reached we cannot agree, since, in' our opinion, the Act of the 9th of April 1873, in no wise interfered with the power of the city councils ■ to contract as they did. So far as mere power was concerned, they had as much after as before the date of that act. Nowhere in this statute is found the expression of an intention to interfere with municipal powers. It but repeals previous Acts exempting loans, bonds and other evidences of indebtedness, from taxation for state purposes, but it certainly does not take avray from any municipality the right, if any such it had, to contract with its creditor for the payment of such tax. Could the clause cited be regarded as a mere reference to the preceding exemption Acts, there would be no doubt as to the rectitude of the judgment of the court below, for in that case, whether the holder of the bond had, or had not, taxes of any kind to pay would depend solely upon the legislative will. But that this part of the bond cannot be regarded in this light is manifest in this: at the time when the joint resolution of the city councils, of May 19th 1873, authorizing the issuing of this obligation, among others, was passed, those parts of the Acts exempting such obligations from state tax had been repealed. There was, therefore, at that time, nothing of the kind to which reference could have been had, so that if the clause referred to is to have any force whatever, it must be regarded and treated as it was in th<? court below, as a covenant. Admitting, then, as settled, that there was a contract on part of the city of Scranton with its creditor to pay the state tax, we think its power to make such contract was found, not in the Act of April 23d 1866, or in that of the 19th of March 1873, but in the Act of March 27th 1865. “ It shall be lawful for any borrower, whether by mortgage security or otherwise, to contract,” &c. The most ample power is here given to all coming within the category of borrowers, to contract for the payment of taxes. The learned judge thought this did not apply to municipalities, but for this opinion he gives no reason. That it does apply to corporations other than municipal cannot well be denied, for the words “any borrower” can certainly not be confined to natural persons; the words are entirely too extensive in their meaning to admit of such a construction. Besides this, a power is given to contract. which, as to private persons, is superogatory, since, as to them, it was only necessary to relieve such contract from the taint of usury, for which the latter part of the Act makes provision. But if the statute does apply to corporations, by what process of reasoning can we eliminate from its provisions municipal corporations? We. [394] confess that no such process presents itself to our mind. Beyond controversy, the city of Scranton, when it received the money on the bond of the plaintiffs, was a borrower, and being such, it does seem to us, that it must certainly come within the meaning of the words “ any borrower.” We conclude, therefore, that the repeal of the Acts of 1866 and 1873 in no way affected the power of the defendant to contract for the payment of taxes, a power previously conferred upon it by the Act of 1865, and that thus having the power, and having so contracted with the payee of the bond now held by. the plaintiffs, it must pay the coupons, which they hold, without deduction or abatement. The judgment is reversed, and it is ordered that the court below direct judgment to be entered for the plaintiffs for the full amount of the coupons in suit with interest and costs.