Peake v. New Orleans (139 U.S. 377)

APPEAL FROM THE CIRCUIT COURT OF THE UNITED STATES FOR THE EASTERN DISTRICT OF LOUISIANA Syllabus The judgment at law on which the bill in this case is based absolved the defendant from any primary obligation of debtor to creditor, and left it chargeable only as trustee of a fund out of which plaintiff's claim was to be paid, and it was unquestionably correct. To the extent that the City of New Orleans may be considered as such a trustee, it is a compulsory trustee by force of the legislation of 1871, and not a voluntary and contractual trustee, and its responsibility should be restricted to the narrowest limits. In failing to collect the uncollected assessments, the city was guilty of no dereliction of duty as trustee. The various assessment proceedings, taken in connection with the decision of the supreme court approving the homologation of the tableaux, may have operated if not to cast a specific lien upon the streets and other public grounds, at least to charge upon the city an obligation to the drainage fund for a proportionate share of the total cost of the drainage,   but the city has, by its issues of city bonds in exchange for warrants, paid an amount on account of drainage far in excess of all the assessments charged against it, and nothing is due from it as trustee on this account. By the purchase of the property of the canal company under the Act of February 4, 1876, the city did not assume the duty of completing the contemplated work, and did not incur any responsibility for injuries resulting from its noncompletion. A municipality which abandons a contemplated work of public improvement assumes thereby no obligation to parties who have invested on the faith and expectation of benefit from the completion of the work. When a contract for local improvements in a municipality is entered into, the contractor must look to the special assessments, and to them alone, for his compensation, and if they fail without dereliction or wrong upon the part of the corporation, neither justice nor equity will tolerate that it be charged as debtor therefor. On March 18, 1858, the State of Louisiana passed an act to levee, drain, and reclaim certain lands situate in the Parishes of Orleans and Jefferson comprising the Cities of New Orleans, Jefferson, and Carrollton, the whole area thereof being 26,026 acres. These lands were separated into three districts, entitled "draining districts." To carry this act into effect, a board of commissioners was appointed for each district. They were given full power to do the work, each in its district. Payment was provided for in this way: the commissioners were to prepare a plan of the district to be drained, showing the work to be done, the subdivision of the ground into lots, blocks, etc., with the names of the several owners thereof, and to deposit such plans in the office of the recorder of mortgages in the parish in which the lands were situated. After publication, the several district courts within whose jurisdiction the lands to be drained were situated were directed to decree that each portion of the property situated within the limits mentioned in the notices is subject to a first mortgage lien and privilege in favor of such board of commissioners for such amount as might be assessed upon the property for its proportion of the cost of draining, with interest thereon at six percentum per annum from demand thereof. The decree was to be recorded in the office of the recorder of mortgages, and the lien and privilege mentioned therein were declared to "take precedence over all    mortgages, liens, and privileges whatsoever, whether tacit, conventional, legal, or judicial, and shall attach to said property until the amount assessed, and the interest thereon, shall have been paid in full." The commissioners were thereafter to levy such uniform assessments upon the superficial or square foot within the drainage section as might be necessary for payment of the work. This statute also provided that, on nonpayment of the assessment, judgment might be recovered therefor in any court of competent jurisdiction, and the land so assessed sold according to law. An appropriation of $81,000 of the swamp-land fund was made by the legislature for the purpose of aiding in carrying out the purposes of this statute. By a supplementary statute of March 17, 1859, the several boards of commissioners were authorized to issue bonds, to be designated "draining bonds." By these bonds it was contemplated that money should be raised at once for the payment of the work, in anticipation of the collection of the assessments. On March 1, 1861, another statute was passed providing a summary remedy for the collection of these assessments. This statute declared that the homologation of the tableaux of assessment should operate as a judgment against the property assessed, and the owners thereof, on which execution might issue as on judgments rendered in the ordinary mode of proceeding. Some work was done under these statutes by the direction of the commissioners, but the exact act amount is not disclosed, though evidently but an inconsiderable fragment of that which was contemplated. The boards of commissioners made plans and assessments in their several districts, as required. The assessment rolls were approved and homologated, and judgments rendered against the parcels of land and the owners thereof as the same were described in the assessment rolls. As the assessment was to be upon the superficial foot, obviously, within the limits of the City of New Orleans, some portion of the assessment would rest upon the streets and other public grounds, and in the tableaux, the City of New Orleans was named as the owner thereof, and judgments were rendered against it, as owner, for sums amounting in the several districts to $719,926.63. On March 2, 1869, an act was passed to repeal the laws creating the draining districts, and turning over to the mayors of the cities of New Orleans, Jefferson, and Carrollton, and to the police jury of the Parish of Jefferson, the control of the work and the possession of the property. Nothing seems to have been done under this act, and it is significant only as a declaration of the legislature of the failure of the boards theretofore created under prior statutes. On March 16, 1870, an act was passed uniting the Cities of New Orleans and Jefferson into one city — the City of New Orleans. On February 24, 1871, the legislature passed an act entitled "An act to provide for the drainage of New Orleans." This act empowered the Mississippi and Mexican Gulf Ship Canal Company to excavate draining canals and build protection levees within the corporate limits of New Orleans and Carrolton. The location of these levees and canals, whether large or small, was to be designated by the Board of Administrators of New Orleans, and all lands to be acquired for such purposes were to be held by such board for the benefit of that city. To provide funds for paying for this work, all property and rights acquired and held under prior statutes, by drainage commissioners or others, for the purposes of carrying into effect the drainage system, including therein real estate, plans, books, and all uncollected assessments, were transferred to the Board of Administrators of the City of New Orleans, and all assessments theretofore made were confirmed, and in addition the board was authorized to make an assessment of two mills per superficial foot upon the lands within the draining districts. The statute also provided that all moneys so collected should be placed to the credit of the Mississippi and Mexican Gulf Ship Canal Company and held as funds to be applied only for the drainage in accordance with the provisions of the act and held in trust for the payment of such company, and ultimately for the benefit of the City of New Orleans, should the same not be required for the purposes of drainage. The act also provided the price that should be paid — fifty cents per cubic yard — for the work to be done. In pursuance of this act, W. H. Bell, the Surveyor of the City of New Orleans, devised a scheme   for draining the lands and prepared a plan of the work, which was entitled:  "Chart of draining sections of New Orleans, showing present canals, with proposed protection levees and reservoir canals, May, 1872." He made an estimate of the cost which, after itemizing different portions, closed with the statement that "the whole work ought not to cost over three million of dollars." On April 21, 1871, the City Council of the City of New Orleans passed an ordinance, Ordinance No. 814, which recited that the provisions of the act of 1871 made it mandatory upon the council to provide for an extensive system of drainage and to recognize the claims and accounts of and make settlements with the Mississippi and Mexican Gulf Ship Canal Company for performing such work, and that the city council deemed certain portions of said act unconstitutional as depriving it of its proper control of the drainage system and of its right voluntarily to contract for the work and agree on the price therefor; yet, in view of the importance of the work and the needs of the city, it ordained that "all matters appertaining to drainage and the protection of the city from inundation be placed under the immediate charge of the administrator of improvements, aided by the city surveyor," and directed a plan to be made, etc., of the work. Section 4 reads as follows: "The city shall issue warrants for the payment of the work, as required by the act of the legislature, and, in case of nonrealization or noncollection of assets provided for therein, the same to bear eight percent, per annum interest, the said warrants to be issued with the understanding, to be inscribed therein or endorsed thereon, that they shall not be enforceable by suit and judgment, but, if not paid within one year out of the proceeds of the draining tax and assets, they shall be fundable in bonds of the city, bearing eight percent, interest, payable semiannually, having ten years to run, and with due provision for retiring the same, and securing the punctual payment of interest and gradual extinction of the principal. The city shall have power to sell said bonds or give the same in payment of the work performed, but no sale or exchange shall be made at a price less than eighty cents on the dollar, exclusive of interest, and any holder of any fundable    warrant, after thirty days' notice, if not paid in money, may demand bonds for the same at eighty cents on the dollar." On April 26, 1872, an act was passed by the legislature making provisions for the debt of the City of New Orleans. Section 13 reads as follows: "That for unbonded debts existing December 31, 1871, and unpaid at the time of the passage of this act or caused by receipts of certificates of 1871 for revenues proper of 1872, and for excavations and levees, drainage machinery, and revetments authorized by law or required for the protection of the city from overflow or inundation, the city may issue from time to time, as they may be required, bonds of the denominations of five hundred and one thousand dollars, having fifty years to run and bearing seven percent interest, principal and interest payable in gold in New York and New Orleans, and at any other points that the council may designate, with quarterly coupons, and that the bonds thus issued shall be called 'the new consolidated debt of New Orleans.' No bonds shall be issued but by authority of the council, nor for a lower rate than ninety cents on the dollar.  All issued for excavations and levees authorized by Act No. 30 of 1871, or by drainage laws previously enacted, shall be marked 'drainage series,' and all taxes collected for drainage, and not required for the payment of drainage warrants, shall be devoted to the purchase from the lowest bidder of bonds issued for drainage; no bid to be accepted above par, and the right reserved to the council to reject all unsatisfactory bids." The canal company entered upon its work, but, becoming embarrassed, on May 22, 1872, assigned all its rights to Warren Van Norden. By statute of March 23, 1874, the City of Carrollton was annexed to the City of New Orleans, so that the whole drainage district came within the limits of the latter city. The canal company or its assignee proceeded with the work, continuing it from July 21, 1871, to May 26, 1876. By January 1, 1875, the cost of the work performed amounted to $1,713,635.35. During that time, the city officials issued drainage warrants to the amount of $1,422,263.69, and the holders of the warrants exchanged them for bonds endorsed "new consolidated gold bonds, drainage series," at ninety   cents on the dollar. On January 1, 1875, by amendment to the constitution of the state, the City of New Orleans was forbidden to increase its municipal debt in any manner or form, or under any pretext. This amendment in terms allowed the exchange of old for new bonds and permitted the issue of drainage warrants, payable only from drainage taxes and not otherwise. On February 24, 1876, an act of the legislature was passed authorizing the purchase by the city from the canal company and its assignee of all their rights, under prior statutes, and all tools, implements, and machinery in their possession or belonging to them, and the payment for the same in drainage warrants of the same character and payable in the same way as those provided in the act of 1871. At that time, the work done by the company and its assignee amounted to $2,242,514.78. On June 7, 1876, the City of New Orleans purchased, as authorized, the rights and property above described, the consideration for the same being $300,000 in drainage warrants. Little if any work was done thereafter by the city, and the abandonment of the work resulted in largely destroying the value of that which had been done, the rusting and decay of the machinery and tools, and the inundation and overflow of the portions of the lands attempted to be drained. The complainant, being a bona fide holder of some of the warrants issued to the canal company after the passage of this constitutional amendment above referred to, commenced his action at law and recovered a judgment which reads as follows: "It is ordered, adjudged, and decreed that the plaintiff, James Wallace Peake, do have after the passage of this constitutional the City of New Orleans, as provided by Act No. 30 of 1871, as successor of the drainage commissioners established under Acts 165 of 1858 and 191 of 1859, and the various acts of the Legislature of Louisiana supplementary thereto and amendatory thereof, the sum of six thousand dollars ($6,000), with eight percent interest thereon from July 9, 1875, and costs of suit, both the sum recovered and costs of suit to be paid out of said drainage fund." Thereafter, this bill was filed in behalf of himself, as well as all other parties interested.

MR. JUSTICE BREWER, after stating the facts as above delivered the opinion of the Court.

FULLER, C. J., and HARLAN and LAMAR, JJ., dissenting.