Board of Liquidation of the City Debt v. Louisiana Lucertia/Opinion of the Court

The motion to dismiss is without colorable support. The contention that, as public bodies charged with the performance of ministerial duties, both the board of liquidation and the drainage commission had not the capacity to plead that the provisions of the state Constitution impaired the obligations of contracts in violation of the Constitution of the United States, is foreclosed by the decision of the court below. In that court, as we have said in the statement of the case, the want of capacity in both the bodies to urge the defenses in question was expressly put at issue and was directly passed on, the court holding that under the statutes of the state of Louisiana both the bodies occupied such a fiduciary relation as to empower them to assert that the enforcement of the provisions of the state Constitution would impair the obligations of the contracts entered into on the faith of the collection and application of the 1 per cent tax and of the surplus arising therefrom. Without implying that the reasoning by which this conclusion was deduced would command our approval were we considering the matter as one of original impression, and without pausing to note the ulterior consequences which may possibly arise from the ruling of the court below on the subject, we adopt and follow it as the construction put by the supreme court of the state of Louisiana on the statutes of that state in a matter of local and non-Federal concern.

Accepting, then, in this regard, the decision of the state court, the proposition now pressed reduces itself to this: Although under the state law both of the bodies in question bore such a relation to the interests involved as to empower them to assert that the contract rights were impaired, nevertheless they do not possess the capacity to prosecute error to a decision if adverse to the contract rights. This, however, is but to say at one and the same time that there was capacity and incapacity to assert and protect the contract rights. The proposition that the judgment of the supreme court of the state of Louisiana rests upon an independent non-Federal ground finds no semblance of support in the record. It is true the court primarily considered the case from the point of view of the duty and rights of the defendant and intervener as depending on the law of Louisiana irrespective of the contract rights, but these considerations were by the court declared to be merely a prelude to the decision of the fundamental issue, that is, whether, if the relief prayed was allowed, there would arise an impairment of the obligations of the contracts as specifically alleged both in the return made by the board of liquidation and in the petition of intervention of the drainage commission. Indeed, the opinion of the learned court, which we can consider (Egan v. Hart, 165 U.S. 188, 41 L. ed. 680, 17 Sup. Ct. Rep. 360), expressly announced that the defenses asserted under the contract clause of the Constitution of the United States were the real issues, and were essentially necessary to be decided in order to dispose of the cause. The argument that no Federal question is presented because the court below awarded to the contract creditors all the rights to which they were entitled involves the assumption that jurisdiction to review the decision of a state court disposing of a Federal question depends upon the conception of the state court, or some of the parties to the record, as to the correctness of the decision rendered. This in effect denies the power to review a decision disposing of a Federal question in every case where the state court assumes that such question has been by it correctly disposed of. But this necessarily imports that, in no case whatever where a state court has decided a Federal question, can review in this court be had, since in every case it must be assumed that a state court of last resort has decided, according to its understanding, the issues presented to it for determination.

On the merits the errors assigned substantially raise all the controversies which were below decided. They hence embrace some subjects not essential to be considered in order to dispose of the Federal question.

The power of the constituent body to direct the board of liquidation to sell the bonds, and the right to diminish the fund applicable to the drainage of the city of New Orleans, when viewed apart from the contract rights, involve purely local and non-Federal contentions. When the jurisdiction of this court is invoked because of the asserted impairment of contract rights, arising from the effect given to subsequent legislation, it is our duty to exercise an independent judgment as to the nature and scope of the contract. Nevertheless, when the contract pairment of contract rights, arising from which, it is alleged, has been impaired, arises Seligman, 107 U.S. 34, 27 L. ed. 365, 2 Sup. Ct. Rep. 10, 'for the sake of harmony and to avoid confusion, the Federal courts will lean towards an agreement of views with the state courts, if the question seems to them balanced with doubt.'

It is indeed disputable, as a matter of independent judgment, whether the rights of the contract creditors were as broad as the v. McComb, 92 U.S. 531, 23 L. ed. v. McComb, 92 Ul S. 531, 23 L. ed. 623. Considering the many, and in some respects ambiguous, statutes of the state of Louisiana which are the sources of the contract rights, and permitting the opinion as to those rights entertained by the supreme court of the state of Louisiana to operate upon the doubt which must arise from a review of the statutes alone, we conclude, as a matter of independent judgment, that the contract rights were correctly defined by the supreme court of the state of Louisiana. The question then is, Taking the contract rights to be as thus declared, were they substantially impaired by the conclusions reached by the supreme court of the state? If the answer to this question is to be deduced from the opinion of that court, a negative response is plainly required, since, in the most explicit terms, the opinion holds that the rights to arise in favor of the purchasers of the bonds which the new Constitution directed to be sold were subordinate in each and every respect to all the prior contract rights. In the nature of things it cannot be said that subsequent rights which are so limited as to prevent them in any degree from interfering with prior ones can, as a matter of legal conclusion, be held to impair such previous contract rights. But it is contended,-and this is the controversy most strenuously pressed in the argument at bar,-although by the opinion of the supreme court of the state of Louisiana the contract rights were protected, the decree of that court in effect brought about the destruction of the identical rights which the opinion held could not be lawfully impaired. This proceeds on the assumption that, as the decree of the trial court which was affirmed directed the board of liquidation to sell bonds under the refunding act and constitutional amendment of 1892, it therefore imposed the duty of offering bonds for sale exactly in the form required by the prior legislation without affixing any distinguishing statement to them, thereby causing the negotiable bonds, when sold, to be exactly on the same footing of legal right with those previously used for the purpose of retiring or refunding the debt. Under the law of Louisiana, it is asserted, the judgment, and not the reasoning used in the opinion of the court, is conclusive, and therefore the result above indicated must necessarily flow from the judgment which is now under review.

We do not stop to examine the Louisiana authorities cited to sustain the abstract proposition relied upon, as we consider the premise from which the contention is deduced to be unsound. It is to be borne in mind that under the act of 1890 and the amendment of 1892 the city of New Orleans was to issue a series of ten millions of bonds, to be placed in the hands of the board of liquidation for the retiring and refunding operations, and these bonds, so delivered to the board for the purposes specified, were required to be countersigned and issued by that body before they became complete and perfect evidences of debt against the city. Now, while it is true the mandamus which was awarded against the board directed it to sell bonds placed in its hands under the act of 1890, the ground for the allowance of the writ was the duty imposed upon the board to do so by the new Constitution. Indeed, the opinion of the supreme court negatives the assumption that there was any authority conferred on the board to issue the bonds for the school debt by the act of 1890 or the amendment of 1892. Conceding, arguendo, only that there be, as contended, an exceptional and narrow rule in Louisiana excluding an examination of the pleadings for the purpose of elucidating the scope of a judgment rendered in a given cause,-though the opposite doctrine is upheld by this court (Hornbuckle v. Stafford, 111 U.S. 393, 28 L. ed. 469, 4 Sup. Ct. Rep. 515),-we do not think there is reason for the assertion that the effect of the judgment below is to preclude the board of liquidation, when countersigning the bonds in question for the purpose of sale, from affixing to them a statement that they are issued in virtue of the authority of the new Constitution and as a result of the command of the supreme court of the state. This being done, beyond peradventure, the takers of such bonds would be affected with notice of the legal authority under which they were issued, and of the nature of the rights conferred by that authority, and therefore the inconvenience or possible wrong suggested in argument could not in any event arise. It would be beyond reason to assume that a judgment which commanded the performance of a particular act, because of the existence of a legal duty arising from a specified provision of a state Constitution, should be construed as excluding the right and duty to refer, in issuing the bonds in obedience to its command, to the authority by which alone the power exercised could be brought into play. Not only does the reason of things require this conclusion, but so also does the respect which we entertain for the learned tribunal below preclude the possibility of our accepting the impossible and contradictory construction of the effect of the opinion and decree advanced in the argument which we are considering. Of course, if the judgment below was susceptible of the interpretation contended for, in view of the nature of the contract rights as recognized by the supreme court of the state and established by the opinion which we have just expressed, it would be our duty to reverse the judgment below rendered.

Our affirmance, however, will be without prejudice to the right of the board of liquidation and the drainage commission to hereafter assert the impairment of the contract rights, which would arise from construing the judgment contrary to its natural and necessary import, so as to deprive the board of liquidation of the power, in countersigning the bonds, to state thereon the authority in virtue of which they are issued.

Affirmed.

Mr. Justice Peckham took no part in the decision of this cause.