New Orleans Taxpayers' Ass'n v. City of New Orleans

The opinion of the court was delivered by Fenner, J. The New Orleans Taxpayers’ Association, a corporation, joined by seven individual taxpayers, claiming and admitted to be owners of taxable property in New Orleans, exceeding $60,000 in value, brought this suit against the City of New Orleans and the Mayor and Administrators thereof. They aver, substantially: that, pursuant to the provisions of the Act of the State Legislature, No. 7á of 1880, the said Mayor and Administrators are about to issue an indefinite and unlimited amount of interest-bearing negotiable bonds, which, if issued, will constitute a lien and privilege on the taxable property of petitioners, will necessitate increased taxation for the payment of the same, • and will diminish the funds and resources of the city available to keep the streets clean, light them, pay the police, and carry on the necessary functions of a municipal corporation; that if said negotiable bonds are once issued and passed into the hands of third parties, their validity cannot be inquired into, or their consideration questioned, and that, under the jurisprudence of the Supreme Court of the United States, the power to issue — 569 — said bonds implies the power and duty to levy and collect taxes sufficient to pay the bonds; that thus an increased burden will be illegally placed upon petitioners, and that the amount involved and the petitioners’ interest therein exceed one thousand dollars. They further allege that the defendants have no power or authority to issue said bonds except such as may be derived from said Act, No. 74 of 1880; and that said Act is unconstitutional, null and void on several grounds, which they will hereafter mention and discuss in their order. They pray for an injunction against the defendants restraining them from executing said Act No. 74, or issuing any bonds in pursuance thereof. To this suit, Lawrence Oonroy, with permission of the court, and without objection from any party, intervened, alleging that he is the owner of valid indebtedness of the city to the amount of $17,000, exchangeable for the bonds authorized to be issued by the Act No. 74 of 1880; that he is greatly interested in having the said act executed, and the bonds, to which he is entitled, issued to him, and will be greatly and irreparably damaged by the issue and maintenance of the injunction prayed for by plaintiffs. • He joins the defendant in denying the allegations of plaintiffs’ petition, and in the prayer that the demand thereof be rejected. There is no dispute about the facts which are embodied in admissions by the parties. The district judge, in an able and elaborate opinion, disposed of all the points in the case, and rendered judgment in favor of the plaintiffs, perpetuating the injunction prayed for, and dismissing the intervention, from which both the defendants and the intervenor have appealed. We shall consider the constitutional objections urged to the Act No. 74 of 1880, in their order, viz; 1st. It is claimed that the act is a local and special law passed in violation of article 48, of the Constitution of 1879, which provides that no local or special law, upon any subject not mentioned in article 46, shall be passed unless thirty days notice shall have been given by publication in the locality to be affected thereby, the evidence of such notice having been given to be exhibited in the General Assembly, and the act Itself to contain a recital that such notice had been given. The Act 74 contains no such recital, and it is not pretended that any notice concerning it was published. We do not find it necessary to express any opinion upon the delicate question as to whether or not this act is a local or special law, within the meaning of the Constitution, because we consider that, even if it were both local and special, this particular act is taken out of the operation ■of the general prohibition contained in article 48, by the special mandate — 570 — of article 254, which positively directs that “ the General Assembly, at its next session after the adoption of this Constitution, shall enact such legislation as may be proper to liquidate the indebtedness of the City of New Orleans and apply its assets to the satisfaction thereof.” Act 74, by its express terms, is passed in obedience to this article. It was the duty of the General Assembly to adopt such legislation; and it could find no excuse for the non-performance of this duty, in the fact that nobody had seen fit to give the notice required by article 48. 2d. It is next urged that the act violates article 29, of the Constitution, which provides that: “ Every law enacted by the General Assembly shall embrace but one object, and that shall be expressed in the title.” The title of the act is, “ An Act to authorize the City of New Orleans-to fund its floating debt; to provide for the issuance of bonds thereof; to make such bonds receivable for certain back taxes and for the purchase price of property sold for certain back taxes or otherwise; to provide for the interest on such bonds and for their ultimate payment.” It cannot be justly charged that this title embraces more than one general object, viz: the funding of the floating debt of the city, which naturally and properly includes the mode of funding, the issuance of bonds therefor, provisions for retiring such bonds, whether by receiving them in settlement of obligations ,due the city or by payment, and provisions to meet the current interest thereon. All these are parts of one general object. We have, heretofore, had occasion to interpret this article of the Constitution, to consider its motives and the mischiefs intended to be remedied by it, and the principles which should govern its application. See State vs. Henderson, 32 An. 779. Under the views there expressed, the title of this act is subject to-no valid objection. 3d. The next charge is that Act 74 violates'that clause of article 48 of the Constitution, which prohibits the passage of any local or special law “ granting to any corporation, association or individual, any special or exclusive right, privilege or immunity.” It is obvious that this provision has no conceivable application to the act in question. 4th. The final objection urged would seem, on first impression, to go rather to the effect, than to the validity, of Act 74, and to limit, rather than to annul, the power of the city to act thereunder; but we shall see that, if maintained, it must have a more radical effect. The objection is, that the act only authorizes the funding of the valid indebtedness of the City of New Orleans, and that all the so-called floating debt of the city, contracted between November 2d, 1874, and January 1st, 1880, is invalid and void because in violation of the consti — 571 — tutional amendment of 1874, which was in force between the dates above mentioned, and which provided: “ The City of New Orleans shall not hereafter increase her debt in any manner or form, or under any pretext. And after the 1st day of January, 1875, no evidence of indebtedness or warrant for the payment of money shall be issued by any officer of said city, except against cash actually in the treasury,” etc. This was a perfectly valid constitutional provision, operating in futuro only, and absolutely binding not only on the City of New Orleans, but on all persons dealing with the city. No gloss or commentary can make its meaning more perspicuous. It rendered it impossible for the city, by any voluntary act, to incur increased debt, “ in any manner or form, or under any pretext.” All persons were fully charged with notice that, whatever services they might render, whatever supplies they might furnish, they could never become creditors of the City of New Orleans, because she was utterly incompetent to contract additional debt. If they choose to deal with her, without exacting present payment, upon the faith of expected revenues appropriated to their payment, they simply acquired rights or claims upon that fund, dependent exclusively on its realization and only payable out of the same when converted into “ cash actually in the treasury,” against which alone could a warrant for their payment ever be drawn. The risk of any deficiency in the revenues to meet the expenses was thrown exclusively upon them, because the City of New Orleans could not, “ under any pretext,” incur increased debt. It appears from the admissions in this record! that, but for this suit, “ the defendants were about to issue interest-bearing bonds under Act 74, in exchange for what appears upon the books of the Administrator of Accounts as floating indebtedness,” amounting to $1,460,111 63, of which about $1,000,000 was contracted after the adoption of the amendment of 1874. In other words, it was assumed that, in the face of a constitutional provision absolutely disabling the city from increasing her debt “ in any manner or form, or under any pretext,” she had nevertheless actually incurred additional “ valid indebtedness ” to the amount of a million of dollars. The proposition refutes itself. Its maintenance would rob the constitutional amendment of all effect, and leave in full force the main mischief it sought to remedy. The huge debt of the City of New Orleans had been, in great part, piled up by the funding of claims arising from deficiencies of revenues to meet extravagant expenditures. The object of the amendment was to stop this process, to place it out of the power — 572 — of the city to incur indebtedness for such deficiencies, and- to confine all liability for expenditures within, not estimated, but collected revenues. Mindful of the meritorious character of many of the claims expected to be funded under this act and of the strength of their equitable tide to relief, we have looked at this subject in every possible light; but we find ourselves confronted, at every point, with the imperious question: Can there exist “ valid indebtedness ” of the City of New Orleans, created during a period when, by an existing, valid, constitutional provision, the city was absolutely prohibited from increasing her debt, “ in any manner or form, or- under any pretext ? ” Subtler casuists than ourselves may find a different answer to this question; but we have been able to discover none but a peremptory negative. We have not seen the necessity of following counsel in discussion of various authorities cited, which apply to cases only deceptively analogous. It was the intention of the constitutional amendment to close the mouths of those who would invoke such analogies, and who would thus maintain that it did not apply to debts created in some peculiar manner or form or under some particular pretext. Eor this reason, the amendment prohibited the creation of increased debt “ in any manner or form, or under any pretext.” Thus the law is written, and it cannot be construed away. The question is, not merely whether the Legislature might have had power, since the repeal of the constitutional provision referred to, to authorize or direct the city to fund and to assume payment of these claims, but whether the Legislature has done so. The Act 74, in its title and in its body, only authorizes the city to fund its “ debt,” its “ valid indebtedness;” and, if the claims arising under unpaid ordinances between November 2d, 1874, and January 1st, 1880, are not “ debt,” or “valid indebtedness” of the City of New Orleans, they are not covered by the terms of the act, and are excluded from its benefits. It may well be, that the city might now issue certificates that these claims are valid claims against the uncollected revenues appropriated for their payment, and might even make such certificates receivable in payment of those delinquent taxes; but this is very different from the issuance of interest-bearing bonds, declaratory of municipal liability, and chargeable, not merely on these particular delinquent revenues, but on other resources of the city. It is contended, however, that the exclusion of these claims does not impair the validity of the act so far as it authorizes the funding of the floating debt created prior to November 2d, 1874. We are constrained to conclude differently. The excluded claims, though not debts of the City of New Orleans, — 573 — are perfectly valid claims against the uncollected revenues of the city for the years in which they were created, which revenues were appropriated to their payment. Such appropriation was within the power of the city, and, when made, constituted a quasi assignment of said revenues. The city collects these revenues as a kind of trustee, and is bound to appropriate them, when collected, to the payment of these claims. The rights of these claimants upon these revenues are vested rights, which cannot be divested without payment or adequate compensation. Now the effect of section 5 of Act 74 is to -withdraw all the taxes and licenses due the city prior to January 1st, 1879, from the payment of these claims and to set them aside and constitute them a special fund for the payment of the principal and interest of the bonds authorized by the act. The bonds themselves are made receivable for all such taxes, and all moneys received in payment of said taxes are required to be devoted exclusively to the payment of said bonds and interest. This operates a complete divestiture of the rights of the excluded claims upon these revenues, in direct violation of article 155 of the constitution. We are constrained, therefore, to confirm the conclusion reached by the district judge, declaring the act unconstitutional and perpetuating the injunction. It is, therefore, ordered, adjudged and decreed that the judgment appealed from be affirmed at appellants’ costs. Rehearing refused.