New Orleans v. Clark - 95 U.S. 644 (1877)
U.S. Supreme Court
New Orleans v. Clark, 95 U.S. 644 (1877)
New Orleans v. Clark
95 U.S. 644
1. Where an ordinance of a city authorizing a contract with a gas company and the issue to it of bonds of the city, provided that the company should "guarantee the said bonds and assume the payment of the principal thereof at maturity," held, l. that the guaranty embraced both the principal and interest of the bonds; 2. that the ordinance contemplated two undertakings by the company, one to the bondholder to answer for the city's liability, and the other to the city to provide for the payment of the principal of the bonds on their maturity.
2. The endorsement on the bonds by the president of the company, guaranteeing "the payment of the principal and interest" of them, was a compliance with the ordinance and contract as to the guaranty.
3. It is competent for the legislature to impose upon a city the payment of claims just in themselves, for which an equivalent has been received, but which, from some irregularity or omission in the proceedings creating them, cannot be enforced at law.
4. A law requiring a municipal corporation to pay such a claim is not within the provision of the Constitution of Louisiana inhibiting the passage of a retroactive law.
This was an action commenced Feb. 7, 1874, by Freeman Clark against the Jefferson City Gaslight Company and the City of Carrollton, La., to recover $7,200, the amount of overdue interest coupons cut from certain bonds issued by said city to that company.
On the 11th of January, 1871, the Mayor and Council of the City of Carrollton passed an ordinance authorizing the mayor to enter into a contract with that company to light the city and supply the citizens with gas light, and providing that, in consideration of the execution of the contract by the company within a specified time,
"the City of Carrollton, through the mayor, shall provide and issue forty-five $1,000 bonds of the City of Carrollton, payable in thirty years, with interest at eight percent, payable semiannually to the order of the said Gaslight Company, provided the said company shall guarantee the said bonds, and assume the payment of the principal thereof at maturity, and provided further that if at the maturity the said company shall fail to pay said bonds, then the said city shall pay the same, and become the owner of all
the gas works, main pipes, posts, &c., then lying and being within the present limits of the City of Carrollton."
"That the Treasurer of the City of Carrollton shall specially appropriate and set aside in lawful money, every month, such amount or proportion of the taxes and dues of said city as shall be necessary to meet the interest on said bonds and such gas bills as may accrue against said city, and that the mayor in said act shall be authorized to make such other agreements, not inconsistent herewith, as may be necessary to carry out the purposes of the ordinance, and make the said contract legal and conclusive on both parties thereto."
A contract embracing the terms and stipulations of the ordinance was entered into between the mayor and the company, and the latter, having complied therewith, received the bonds, with coupons for interest attached.
The bonds and coupons were in the following form:
"No. 1] CITY OF CARROLLTON [$1,000"
"A.] State of Louisiana [No. 1"
"Know all men by these presents that the City of Carrollton will pay to the Jefferson City Gaslight Company or order the sum of $1,000 in current money of the United States in thirty years from the date thereof, with interest at the rate of eight percent per annum, payable semiannually on the first day of January and first day of July of each year, at the office of the city treasurer, on the delivery of interest coupon attached to said bond. For the payment of the principal and accruing interest on this bond the faith and credit of the City of Carrollton is pledged, as set forth in the ordinance printed on the reverse hereof, passed and approved Jan. 11, 1871."
"In testimony whereof, the seal of the City of Carrollton is hereto affixed, and the signatures of the mayor, controller, and treasurer appended in writing on the first day of July, 1871."
"T. A. MARTIN, Controller"
"FREDERICK KERN, Treasurer"
"D. M. BISBEE, Mayor"
"[Written across the face:] The Jefferson City Gaslight Company guarantee the payment of the principal and interest on this bond to the holder thereof."
"JOHN LOCKWOOD, President"
"The City of Carrollton will pay to bearer forty dollars at the office of the city treasurer, being six months' interest due July 1, 1874, on bond No. 1, for one thousand dollars."
"A. FREDERICK KERN, Treasurer"
An Act of the Legislature of Louisiana, passed Feb. 12, 1872, empowered the Mayor and City Council of the City of Carrollton to ordain, establish, and cause to be carried into effect and execution, all such by laws, ordinances, resolutions, rules, and regulations as they might deem expedient for the good government of said corporation which are not contrary to the constitution and laws of the state or the United States. They were also authorized and empowered to fund the outstanding debts and obligations of the city created for wharves, streets, gas, and other improvements of said city, by issuing its bonds in such sums as they might deem advisable, running for thirty years, with interest at eight percent payable semiannually, provided, that any ordinance for the issue of bonds should provide for the payment of their principal and interest by levying such annual tax as would raise a sufficient sum to pay the interest of said bonds as the same might come due, and should create a sufficient sinking fund to meet the principal at maturity.
April 10, 1872, the following ordinance was adopted by the Mayor and Council of the City of Carrollton:
"An ordinance to provide for the payment of the bonds and interest on the same, as authorized by the provisions of the new charter of the City of Carrollton, bearing date the twelfth day of February, 1872, providing for the funding of the outstanding debts and obligations of the said city created for the wharves, streets, gas, and other improvements of said city."
"SECTION 1. Be it ordained by the Mayor and Council of the City of Carrollton, that there shall be assessed and levied a tax on all real and personal property within the limits of said city, as per amended charter, bearing date the twelfth day of February, 1872, and to be collected annually, one half of one percent (1/2 percent), for the purpose of paying the principal and interest of two hundred bonds of $1,000 each, or as much thereof as may be required to
fund the city debt, and to be issued under this ordinance, and running for thirty years, the proceeds of the same to be applied for the purpose of funding the city indebtedness."
"SEC. 2. Be it further enacted, that the aforesaid tax of one half of one percent shall be assessed and levied on the assessment rolls of 1872, and shall not be exigible or collectible before the year 1873, and shall then be collected in the same manner as other taxes, and in accordance with the city charter in relation thereto."
"SEC. 3. Be it further enacted, &c., that the Treasurer of the City of Carrollton shall annually set aside, after paying the interest as provided semiannually on said bonds, a sufficient amount to pay the principal at maturity, and provided further that any failure or neglect upon the part of the treasurer of said city to comply with the provisions of said ordinance shall be a sufficient cause for his removal from office."
"SEC. 4. Be it further enacted that the mayor of the said city, and chairman of the finance and the chairman of the streets and landings committees, be, and are hereby, authorized and empowered to forthwith negotiate a loan, sufficient in amount and as heretofore provided for in this ordinance, to liquidate the indebtedness of said city, and that the mayor is hereby authorized and empowered to have engraved and printed two hundred bonds of $1,000 each, with coupons attached, and to warrant on the treasurer for the payment of the printing and engraving of the said bonds, and to issue the necessary amount of bonds payable in thirty years required to meet said loan thus negotiated."
"SEC. 5. That this ordinance take effect from and after its passage."
An Act of the legislature approved March 23, 1874, enacts as follows:
"SECTION 1. That all that portion of the parish of Jefferson being and lying below the center of Upper Line Street of the City of Carrollton, commencing at Mississippi River, and extending northwardly along the centre of said street to its terminus, and thence along the centre of the line of the New Orleans and Carrollton Railroad to Lake Pontchartrain, shall be and constitute the upper boundary line of the Parish of Orleans and the City of New Orleans, and all that portion of the City of Carrollton thus detached from the Parish of Jefferson and added to the City of New Orleans and Parish of Orleans shall be governed by the mayor and administrators of the City
of New Orleans, in accordance with existing laws, except so far as not inconsistent with this act."
"SEC. 5. That all the rights, titles, and interest of the City of Carrollton, as now existing, in and to all lands, tenements, hereditaments, bridges, ferries, streets, roads, wharves, markets, stalls, levees, landing places, buildings, and other property of whatsoever description and wherever situated, and of and with all goods, chattels, money, effects, dues, demands, bonds, obligations, judgments and judgment liens, actions and rights of action, books, accounts, and vouchers be, and they are hereby, vested in the City of New Orleans, provided that all estates, income funds, or property of every description now held in trust by said City of Carrollton, or which shall have been specially pledged or affected by the payment of any debt, shall be held by the City of New Orleans, under this act, upon and for the same use, trust, limits, limitation, charities, and conditions as the same are now held, and the debt and all other indebtedness or liabilities of the City of Carrollton, including the funding and improvement bonds, and the bonds issued to the Jefferson City Gaslight Company, and known as the gas bonds, and notes, interest coupons, wages, salary due or to become due, warrants, or other species of obligations whatsoever, shall be assumed and paid by the City of New Orleans; and said city is hereby declared liable therefor, provided further that all officers of said City of Carrollton shall continue as at present constituted to discharge the duties of their respective offices until this act of incorporation can be completed by putting into possession of the proper officers of the City of New Orleans the books, papers, records, documents, and other property now belonging to the City of Carrollton, and no longer, and after which time all the powers, rights, privileges, and immunities possessed and enjoyed by the Mayor and Council of the City of Carrollton shall cease and terminate, and provided further that the claims or vested rights of any person or persons, or company or corporation, of said City of Carrollton, that have been granted, acquired, or received from or against said corporation of the City of Carrollton, or otherwise, shall not be interfered with, divested, or impaired by this act, nor by the City of New Orleans, without adequate compensation."
"SEC. 8. That the act entitled 'An Act to incorporate the City of Carrollton,' approved March 17, 1859, and all acts amendatory thereof, be, and the same are hereby, repealed."
"SEC. 12. That all laws and parts of laws in conflict herewith be, and the same are hereby, repealed, and this act shall take effect from and after its passage. "
Sec. 4 of an act of the General Assembly of Louisiana passed in 1855, No. 263, provides:
"That the constituted authorities of incorporated towns and cities in this state shall not hereafter have power to contract any debt or pecuniary liability, without fully providing in the ordinance creating the debt the means of paying the principal and interest of the debt or contract."
The City of Carrollton pleaded the general issue, and, in addition, declared that it was in no wise bound for said bonds, because 1, they were issued by the officers of the city in violation of its charter; 2, that the ordinance and the contract made under it were illegal, null, and void, and, if the city had been expressly authorized to issue the bonds, the council, by the ordinance contracting said debt, made no provision to pay the principal or interest.
The gas company, in its answer, insisted that the bonds issued under the contract for supplying the city with gas were valid; that the city had accepted the works of the company, and enjoyed the benefit of the same ever since, and was therefore bound to pay the coupons as they became due. The answer prayed that the City of Carrollton be called in warranty, and be condemned to pay to the company any sum of money which the company might be decreed to pay to the plaintiff. March 26, 1875, after said answer had been made, Clark filed a supplemental petition, averring that since the commencement of his suit the legislature had passed an act, approved March 23, 1874, repealing the act incorporating Carrollton and annexing it to the City of New Orleans; and, further, that by the fifth section of that act the latter city was made liable for said bonds in solido with the said gas company.
To this supplemental petition the company filed an answer, denying all the allegations of the petition tending in any way to show responsibility on its part, and alleging that the City of New Orleans was bound to hold the respondent harmless from any claim of the plaintiff, and praying that said city be called in warranty, and condemned to hold the respondent harmless, &c.
The City of New Orleans also filed an answer, insisting upon
the exception filed by the City of Carrollton, and that it should first be disposed of. After a general denial of the allegations of the supplemental petition, the answer averred that the City of Carrollton was without power to issue the bonds; that there was neither a moral nor a legal obligation on New Orleans to pay the same; and that any act of the legislature imposing such obligation was null and void.
There was a judgment in favor of Clark for $7,200 against the gas company, and one in favor of the company, on the call in warranty, against the City of New Orleans for a like sum.
The company and the city each sued out a writ of error, and brought the case here.