Taxing District of Brownsville v. Loague

On the 27th of March, 1886, a rule to show cause was entered, to which defendants appeared and moved to quash, which motion was treated by agreement as a demurrer, and subsequently the court delivered its opinion in decision of the questions thus raised, (29 Fed. Rep. 742,) a portion of which is as follows: 'Following a public policy reviewed in its application to the city of Memphis in Meriwether v. Garrett, 102 U.S. 472, the legislature of Tennessee, in 1879, inaugurated a plan of relief for insolvent municipal corporations, whereby it was expected they could escape the payment of their debts, unless the creditors would accept the 'settlements' tendered them under the provisions of the legislation. The general plan was to repeal the charters, so that there should be no officials or agencies liable to judicial compulsion by mandamus; then to supply other agencies of local government invested with all the powers of the old municipalities, except the taxing power, which was not only withheld, but conspicuously prohibited, to those new organizations called 'taxing districts.' The taxes for carrying on the new contrivances were to be levied directly by the legislature itself upon the taxables within their boundaries, and, that body not being amenable to any judicial coercion by mandamus, it was believed that the creditors were wholly without remedy. The legislature then provided for a settlement with creditors upon the general basis of refunding the old indebtedness at the half, the amount at which the state 'settles' or 'compromises' its own indebtedness. The taxes to pay the interest and principal of the new bonds, like other taxes for municipal purposes, were to be levied directly by the legislature; but provision is made that in default of such levy the 'taxing districts' may themselves levy the necessary tax. Acts 1883, c. 170, p. 224. This act applies to all 'taxing districts' of whatever class, and by its twentieth section 'repeals all laws or parts of laws in conflict herewith.' * * * The legislature repealed the defendant's charter in 1879, the judgments here involved being at that time unsatsfied in this court. Acts 1879, c. 27, p. 41. In 1881 the formation of 'taxing districts of the second class' was authorized, and under that act such a 'taxing district' was organized for Brownsville in 1883. Acts 1881, c. 127, p. 174. By these two acts 'commissioners' were substituted for the formerly existing 'mayor and aldermen,' with all the usual authority, legislative, executive, and judicial, except the power to levy taxes, which was prohibited; but the act of 1879 especially enacted that nothing contained in it should impair the obligation of them existing contracts, and the act of 1881 'hereby levied' a tax of one dollar per hundred, one-half of which was to be applied to the current expenses, and the other to the old debts. Specific power was also given to one of the 'commissioners,' called the 'secretary and financial agent,' to assess and collect this tax. The general act of 1883, already noticed, relating to all taxing districts had been passed, but by an act of 1885 the act of 1881, relating to 'taxing districts of the second class,' was amended, and section 2 gives the commissioners the most ample power to levy taxes and appropriate money to provide for the payment of 'all the debts and current expenses of the districts.' Acts 1885, c. 82, p. 162. It is apparent that, notwithstanding the general act of 1883, and its broad repealing clause, the legislature (or, rather, the authors of this legislation relating to Brownsville) considered the act of 1881 as wholly unaffected by it. But by a subsequent act of 1885, at the extra session, the full powers given under the former act of that year were taken away, or rather limited to the payment of the 'compromise' bonds only, the evident object of the last act being to correct this careless blunder of a departure from the general plan of relief already fully commented upon. Acts Ex. Sess. 1885, c. 10, p. 75.'

The act of the extraordinary session referred to was approved June 10, 1885, and reads thus: 'Section 1. Be it enacted by the general assembly of the state of Tennessee that section 2 of an act entitled 'An act to establish taxing districts of the second class, and to provide the means of local government therefor,' passed March 30, 1885, be so amended as to read as follows: That section 8 of said act, passed April 1, 1881, be so amended as that the board of commissioners, after the debts of the taxing districts shall have first been compromised between said taxing districts and creditors, shall have power by ordinance within the district to levy taxes upon all property taxable by law for state purposes, and upon all privileges and polls taxable by law for state purposes, and may appropriate the money arising from the collection of taxes so levied, after defraying the current expenses of the taxing district, to the payment of the debts of said taxing district that have been compromised; and anything in said section 2, or in the act passed March 30, 1885, in conflict with this act, is hereby repealed. Sec. 2. Be it further enacted that this act take effect from and after its passage, the public welfare requiring it.'

The following were among the conclusions reached and announced by the court: 'If a municipal charter be repealed, and the same inhabitants and territory be reorganized into another corporation, the latter is the successor of the former, both in the corporate obligation to pay the existing debts and those corporate powers of taxation conferred as a part of the remedy of the creditors; and any statutory prohibition of its exercise is void, under the inhibition of the federal constitution against impairing the obligation of contracts. Those agencies existing for the local government of a municipality are bound to perform such duties as are necessary to enforce the taxing power although not especially designated for that purpose, if there be a general grant of the power of taxation to the municipality itself. This duty is implied from the general grant, whether it be conferred directly by statute upon the particular municipality, or devolved upon it as the successor in corporate obligation through a grant to its predecessor; therefore a mandamus will lie to enforce, by taxation, the payment of judgments against the original corporation, to be directed to the governmental agencies of the new corporation, they to proceed according to the general laws of the state governing the exercise of the taxing power by municipalities possessing the authority. Under the legislation of Tennessee repealing municipal charters, and reorganizing the inhabitants into taxing districts, contrived to compel creditors to accept a compromise of their debts at reduced amounts, the prohibitions of the exercise of the taxing power by the new local governments are void, so far as relates to those grants of that power to the old corporations, which enter into contracts as a part of the remedy of creditors, and the taxing districts may be compelled to exercise the power given by these original grants, by proceeding, according to the general tax laws of the state, to certify to the county court clerk the necessary rate to pay the judgment, to be extended upon the tax-books, and collected as other taxes are collected. It is not necessary that the particular officials to perform this duty shall be disignated in the statute, but the general grant to the corporation implies that the officials governing the municipality shall perform it, and it will be enforced by mandamus against the new commissioners, who take the place of the former mayor and aldermen. Any takes levied by the legislature for municipal purposes, or grants of power to a municipality to make such levies, may be repealed, if they be subsequent to the contract involved, as there is no protection under the federal constitution except for such powers of taxation as enter into and become a part of the contract itself, and belong as a remedy to the creditor.'

The demurrer having been overruled, the respondent answered, denying the possession of any power or authority to levy any tax whatever to pay judgments and indebtedness such as represented by the petitioner; and averring that the old corporation had no power or authority in law to levy a tax for such purposes, and consequently no such power or authority devolved upon the taxing district; and that the power and authority to issue the bonds and levy a tax to pay interest thereon, upon which plaintiff's suits were founded, 'was given to Brownsville by the act of February 8, 1870, by the legislature of Tennessee, but before the contract was completed or the election under said act of 1870 held by Brownsville, or the bonds issued, the said act of 1870 was repealed and abrogated by the constitution of the state of Tennessee, which went into effect May 5, 1870.' Respondent further alleged that the judgments were obtained by default, and that on the previous mandamus proceedings the question of want of power, because of the abrogation of the act of February 8, 1870, was not raised. Motion to quash this answer or return was then made by petitioner, and the cause submitted upon such motion, together with an agreed statement of facts to the same effect as the statement in the preceding case, (ante, 322;) it being also stipulated that the judgments had been obtained by default, and that the question of power in the corporation to levy a tax because the act of 1870 had been abrogated by the constitution was not raised in defense to the previous applications for writs of mandamus. The circuit court held (36 Fed. Rep. 149) that 'no defense can be made to a writ of mandamus issued upon a judgment by default against a municipal corporation which might have been made to the original suit upon the coupons;' and 'therefore, where bonds issued without legislative authority were invalid, that the defendant corporation was bound by a judgment by default upon the coupons, and could not set up as a defense to the mandamus that there was no act commanding the tax to be levied, this being the same defense as the other, when it depends upon the want of authority to issue the bonds, as in this case.' In the opinion of the court, although the act of February 8, 1870, was abrogated by the state constitution, and the bonds were therefore void, yet judgment upon the coupons conclusively established the validity of the bonds and so also the validity of the legislation giving the remedy by a levy of taxes for their payment. The return of the respondent was accordingly quashed, and judgment entered awarding the peremptory writ as prayed.

W. W. Rutledge and ''Wm. M. Smith'', for taxing district.

Henry Craft, L. P. Cooper, Sparrell Hill, for defendant in error.

Mr. Chief Justice FULLER, after stating the facts as above, delivered the opinion of the court.