City of New Orleans v. Fisher

PARDEE, Circuit Judge (after stating the facts as above). There are 14 assignments of error on the part of the city of New Orleans, many of which are argumentatively stated, but which we will consider in order, disregarding those argued in the briefs, but not specifically assigned. The first assignment of error is as follows: “It was error for the court to decree judgment against the city for any pari of the ¡axes of 1871, for the reason that the evidence shows that no part of complainant’s claims arose during the year 1871; and, further, that the act of the legislature which directed the city to impose a special tax of one-fourth per cent, was passed in the year 1873; therefore could not affect the taxes of 1871. Furthermore, it is error for the court to allow this decree against the city for taxes for 1871, for the reason that the complainant does not claim any share in the taxes of 1871, or any interest thereon, either in her original or supplemental bill; and it was error for the court to allow her more than she clabnecl. Consequently, the amount declared due out of taxes for 1871, to wit, $7,8:11.17, and the delinquent interest of taxes of 1871, $9,332.81, were allowed in error, and should he deducted.” The grounds stated in this assignment form no pari: of the exceptions filed to the master’s report, and it can hardly be said that the judge below erred in this respect when his at ten I ion does not appear to have been called to it. Under article 254 of the constitution of 1879, and under Act No. 49 of 1880, the taxes due the school fund previous to 1879 constitute but one fund. Fisher v. Directors, 44 La. Ann. 184, 10 South. 494; Gasquet v. Board, 45 La. Ann. 342, 12 South. 506; Fisher v. Board, 48 La. Ann. 1077, 20 South. 163. The record shows that the complainants’ judgments are made payable out of the school taxes levied by the city of New Orleans prior to 1879. The prayer of the bill is for a full account, and for general relief, and the order of reference specifies the school taxes levied in 1871, and is not complained cf. The objection, if good, which we do not admit, comes too late. The second assignment of error is as follows; “This being a suit for an accounting, the court erred in giving judgment against the city for money that she never collected, in that the judgment includes the sum of $11,933.27, which the master’s report states is a discount allowed by the city to the taxpayer for payment of school taxes; and as the bill only claims and asks that the city be compelled to pay over the actual amount of cash collected, and as this money was never collected, we submit that it was error for the court to order it paid over. This being only a suit for an accounting, judgment cannot be had in the bill for anything but money actually collected.” The question raised in this assignment does not appear to have been raised by exception to the master’s report, and we fail to find in the master’s report any reference to the special sum of $11,933.27 as a discount allowed by the city to taxpayers for the payment of school taxes. The act of 1874 (No. 41, page 78), which provided for rebates or discount on taxes paid in full prior to the 20th of March in each year, expressly provided that no discount should be made upon school taxes. The matter herein urged is probably one of the details embraced in the special accountant’s report upon which the master’s report was made up. We are not disposed to follow the question through the exhibits, even if counsel should point the way. The assignment of error is not well taken. — 582 — The third assignment of error, as follows: “The evidence shows that the full amount of money collected for 1874 school taxes was turned over to the school board (see testimony of Clark Steen, and his report, offered in evidence by complainant); and, such being the case, it is urged that it was error for the court to make the city pay over any more monejr out of the taxes of 1874, the city having already paid over all that she awes on that year. Such being the case, the amount of $10,816.59 and $209.50, proportion of interest on school taxes for 1873, and the proper proportion of principal for school taxes for 1874 (to ascertain the amount of which a re-reference to the master is necessary), are not due to the school board. While it is true that all back taxes prior to 1879 are lumped into one fund,- we urge that, in calling for an accounting, it is sufficient for the city to show, in order to be discharged as far as the taxes of any particular year are concerned, that she has paid over the full amount of taxes due the school board for that year; and, having done this with the taxes for 1874, it is error for the court to order her to turn over any more of the taxes for that year.” —Raises more matter involved in the master’s report of which no complaint was made in the exceptions filed to the report, and the assignment need only be noticed because it contains an admission that all the back taxes prior to 1879 were lumped into one fund. The fourth assignment of error raises the question of the complainants’ remedy at law. A general demurrer was filed to the bill, and the same was overruled, and no assignment cf. error covers the same, unless this fourth assignment be so considered. The counsel for the city of New Orleans say, in support of this assignment: “A reading of the judgment [which is found in the transcript] will show your honors that it is of such a nature that, by garnishment proceedings, she could have obtained all needed relief under that judgment, and that that was all that was required and necessary to collect anything due her by the city, or anything due the school board by the city. Consequently, as she has an adequate remedy at law, it is wrofig to permit her to proceed in equity.” On the other side, it is said: “Solicitors for complainants have been litigating during these ten years, and the only relief to be had is through the equity court.” We consider the bill as a creditors’ bill to reach equities existing between the school board of the city of New Orleans and the city of New Orleans, in which an accounting between the two parties is necessary, in order to ascertain the indebtedness of the city to the city school board. No such relief can be obtained at law. The fifth assignment of error is to the effect that complainant has no right to sue the city of NeW Orleans, because her judgments are against the school board only, and she does not allege that the city owes the school board anything. We think the issue of indebtedness of the city of New Orleans to the school board is sufficiently asserted in the bills, and is clearly put at issue in the answer. The sixth assignment of error is as follows: . “The evidence shows that in suit No. 12,060 the city was garnished on July 12, 1894, under a fi. fa., and answered under oath that she had one thousand eight hundred and ninety-three 9/100 dollars to the credit of the school fund prior to 1879 on that date; and, having paid that amount over to Mrs. Fisher under her judgment, it was error for the court not to hold that said payment to and acceptance by Mrs. Fisher, complainant herein, estopped her from traversing said garnishment, as she is doing by this proceeding; and the court should have held such payment and aeceptanee as an estoppel and res judicata concerning all collections made v. to July 12, 1894.” — 583 — The proposition enunciated in this assignment of error is that an issuance of execution and garnishment proceedings thereunder operal. an estoppel to a creditors’ bill founded on the same judgment, and seeking an accounting between the judgment debtor and the garnishee. If the general proposition should be conceded, its applicability in the present case is not apparent. In our view, the garnishment proceedings shown in this record were against the treasurer of the city and ex officio treasurer of the school board,—a stakeholder,—under which, at law, no accounting as between the city of New Orleans and the school board could have been had. The seventh assignment of error is thus stated: “The court erred in approving the finding of the master that the interest or penalty on delinquent taxes formed a part of the taxes, and should be turned over to Ihe board. But, even though this was correct (which course is not admitted), we hold that the court erred in ordering the city to pay over the penalty on the taxes which she had already paid over. In any event, she should not be compelled to pay over the penalty on any taxes, except on those taxes which are still in her possession. In other words, the master’s report shows $23,108.03 of principal; and we submit that only the penalties on this $23,108.03 should be turned over, and not the penalties on the taxes that were turned over to the board years ago.” This assignment refers to the finding of the master’s report holding the city liable for interest collected upon back school taxes. The master said: “It is a question of law whether the school board is entitled to any part of the interest. I think it is. The interest, as a mere accessory of the principal, belongs to the same person to whom the principal belongs.” Under the law, the school taxes carried 10 per cent, interest per annum the day they became delinquent. It was a penalty for nonpayment of the taxes. This interest, or penalty, for delayed payment of school taxes, formed no part of the city’s proper revenues. The city in collecting the same was acting as a trustee for the school hoard. Delay in payment of taxes operated to the prejudice, not of the city, hut of the school fund and its creditors. We are unable to find any authority in law or morals for the city to appropriate to itself this interest. To allow such an appropriation would be to reward the city for its own negligence in the collection of the taxes due the school fund. We fully agree with the master that “the interest, as a mere accessory of the principal, belongs to the same person to whom the principal belongs.” The assignment argumentatively claims that if the city is liable for the interest on taxes collected, which taxes have not been paid over, it is not liable for interest on taxes which it (the city) had collected, and, when paying over the taxes, had withheld. We are unable to see any difference in principle between the two cases. The eighth assignment of error complains of the action of the court below in striking from the records two certain documents, called pleas to the jurisdiction ratione materia et personae, which were filed irregularly after the case had been put at issue, and after the master’s report and exceptions had been filed thereto. The certificate of counsel is not attached to these documents, and they had no proper place in the files of the court. At the same time, it is to be noticed that the right to file pleadings after the pleadings — 584 — have been regularly made under the rules is a matter within the discretion of the chancellor, and not subject to review. Another serious objection to these alleged pleas is that, in so far as they attack the jurisdiction of the court in the original suit in the circuit court in which Mrs. Fisher recovered a judgment against the city school board, and which is the basis of this creditors’ bill, it seems clear to us that the pleas are Objectionable. Mattingly v. Nye, 8 Wall. 370. The ninth assignment of error does not appear to be based on any affirmative ruling of the court below. It appears that leave was asked to file a plea to the jurisdiction, and an order to show cause •issued, but no ruling made in the premises. The tenth assignment is to the effect that it was error not to have allowed the plea of prescription made in the answer of the defendant; for, as it is claimed, the cause of action arose in 1873 and subsequent years, the last year being 1879, and the same was prescribed by 10 years. In the case of Gasquet v. Board, 45 La. Ann. 342, 12 South. 506, the supreme court of Louisiana, in passing on a plea of prescription in favor of the school board, said: “We think the pleas of prescription are not well founded. Act 36 of 1873 makes it very clear that the claims evidenced by these certificates were not payable absolutely or at any particular time. They are payable only out of the revenues of the years for which they are issued, and only when said revenues are collected, and in the manner therein provided; and the act further-declared that ‘no writ of fi. fa. or mandamus shall lie for seizure of any school moneys, or to direct or enforce its paying out otherwise than in the manner and sequence required in this act.’ This law formed a part of the contracts out of which the claims arose, and deprived the claimants of any legal remedy to enforce payment except out of particular revenues when actually collected and covered into the treasury. The case is very much stronger and clearer than that of King Iron Bridge & Manufacturing Co. v. Otoe Co., 134 U. S. 459, 8 Sup. Ct. 582, in which the supreme court of the United States held that county warrants, payable only when there are funds in the treasury applicable thereto, are not actionable until the- money for its payment is collected, and therefore not subject to the statute of limitations, except from the same time.” The principles here declared are in many respects applicable to the case in hand. The judgments sought to be enforced in this case were rendered since 1890, and the school certificates sued on are in judgments, and this suit is brought within 10 years from the rendition of the judgments. The position of the city being that of trustee, her possession of the funds in question is not as owner, and prescription does not, as a general proposition, run in favor of the trustee as long as the trust relation continues. In equity, the trustee should never be allowed to acquire trust funds by limitation. Daniell, Ch. Pl. & Prac. 642; Oliver v. Piatt, 3 How. 411. The eleventh assignment seeks to raise again the question of jurisdiction of the circuit court in the original action, in which Mrs. Fisher obtained a judgment, and needs no further consideration. The twelfth assignment is that the court erred in holding the school taxes to be a trust fund in the hands of the city. The city was collecting the school taxes for the school board, and therein acting as agent, and a trust naturally resulted. — 585 — The thirteenth assignment of error denies the right of the complainants to claim an accounting from the city of New Orleans. Tlds objection goes to the right of the complainants to maintain this suit for an accounting, which to v. seems so plain that no argument is needed to sustain it. The fourteenth and last assignment of error is as follows: “It was error to order the whole fund ascertained by the master to be paid over to complainant and interveners in this suit, because, if said fund is a trust fund, it is held for the benefit of all interested in said fund, and the only part that should bo paid to complainant and interveners is their proportion of same; in other words, it was error for the court to ignore the rights of other certificate holders, not party to this suit, and who were not notified by publication or cited herein; and, to ascertain what proportion of the fund should go to the complainant and interveners herein, a re-reference to the master is necessary.” To this, all that is necessary to answer is that the suit is one brought for the benefit of complainants and others similarly situated. Numerous complainants who desire to participate in the expenses of suit have already intervened, and, if there are others who desire to come in before the final distribution of any funds realized, the circuit court will be open to them. John Fisher, natural tutor, etc., and others, complainants in the court below, assign as error on their cross appeal—First, that, a new trial having been refused after the term in which decree was rendered, the circuit court was without jurisdiction, under equity rule No. 88 and other equity rules governing the practice of the court, to amend its decree; second, that under the equity jurisprudence, as well as under the Louisiana law, complainant and interveners were entitled to a decree carrying interest as was allowed by the original decree. The record shows that after the decree entered at the November term, and during that term, a petition for rehearing was filed, submitted, and taken under advisement; that, pending decision of the matter, the November term of the court was adjourned, and the following April term commenced. As we understand the practice,'the application for rehearing submitted and taken under advisement hindered the decree of the court as entered from becoming final, by the adjournment of the court; and it was competent for the judge, at the following term of court, to grant a full rehearing, or otherwise modify his decree. Goddard v. Ordway, 101 U. S. 745. Whether interest should he allowed upon the amounts decreed against the city, as directed in the original decree, presents a more important question. The master found that the school taxes and interest on school taxes collected by the ciiy of New Orleans for the years prior to 1879, and not paid over to the school board, and now owing, amounted to the sum of §71,938.78; and of this sum the lower court gave originally a decree with 5 per cent, interest on §71,139.60 from January 24,1881, and on §799.18 from May 11, 1896, until paid. The master’s report is silent as to the dates on which the city of New Orleans had collected the several sums found due and owing by it to the school board; but the exhibiis filed with the report show that all of the sum of §71,139.60 was collected by the city prior — 586 — to January 24, 1881, and the sum of $799.18 prior to May 8, 1897. It is not disputed that the amounts collected by the city as interest on delinquent school taxes have been used and appropriated by the city in its own affairs. The general rule in equity is that a trustee who employs trust funds to his own advantage shall be charged interest. The Revised Civil Code of Louisiana (section 3015) is as follows: “Hie attorney 3s answerable for the interest of any sum of money he has employed to his own use, from the time he has so employed it; and for that of any sum remaining in his hands from the day he becomes a defaulter by delaying to pay it over.” It thus appears that, by general equity principles and by the Louisiana Civil Code, the city of New Orleans, as trustee, should be charged with interest. If the case is one showing that the city of New Orleans was a gross delinquent and 'an unfaithful trustee, equity would further require that compound interest should be allowed upon all sums collected and retained by it, with six-month rests. The interest claimed by the exception filed to the master's report, and allowed in the original decree, and now claimed upon appeal, is 5 per cent.,—the legal rate of interest fixed in Louisiana on all debts from the time they become due, unless otherwise stipulated. The decree appealed from, as amended by the judge ex proprio motu when the petition for rehearing was refused, allows no interest prior to the date of the decree. The amendment appears to have been suggested by the master’s report, to the effect that, at the date thereof, the city then owed the school board, for taxes collected and for interest on taxes collected, $71,938.78. An inspection of the report and the exhibits shows, however, that the moneys so found due have been for a long time in the hands of the city of New Orleans. That the master’s report allowed no interest on these sums so held by the city was a specific ground of exception on the part of complainants to , e master’s report, and exceptors said “that your exceptors are entitled to interest with an annual rest, according to the rules and principles of equity and jurisprudence; but they will content themselves with simple interest, reserving their rights to a further account when found necessary.” Under all the circumstances, as shown by the record, we are of opinion that an allowance of 5 per cent, interest on the amounts collected by the city prior to January 24, 1881, and held and employed in the city’s affairs since that date, would be just and equitable, and that the decree as originally rendered by the circuit court was correct, except as to interest on the sum of $799.18, which was only allowable from May 9, 1897, instead of from May 11, 1896. The decree appealed from is amended so as to allow 5 per cent, interest on the sum of $71,131.60 from January 24, 1881, and on the sum of $799.18 from May 8, 1897; and, as amended, the said decree is affirmed, with costs against the city of New Orleans.