A county subscribed for stock of a railroad corporation, and
issued bonds in payment therefor, pursuant to a law which
authorized a levy of a special tax to pay them, "not to exceed
one-twentieth of one percent upon the assessed value of taxable
property for each year," but contained no provision that only the
fund so derived should be applied to their payment.
Held
that the bonds are debts of the county as fully as any other of its
liabilities, and that for any balance remaining due on account of
principal or interest after the application thereto of the proceeds
of such tax the holders of them are entitled to payment out of the
general funds of the county.
On the fourth day of January, 1876, the United States, on the
relation of William A. Johnston, filed in the court below a
petition for a mandamus against the County Court of Clark County,
Missouri, and the justices thereof.
The case exhibited by the pleadings is this:
On the sixth day of June, 1874, said Johnston recovered a
judgment in said circuit court against that county for $8,606.64
and costs. The judgment was for unpaid installments of interest on
bonds of the county, each for $500, issued on the first day of
June, 1871, by order of the county court in execution of a power
conferred by the charter of the Missouri & Mississippi Railroad
Company. The whole issue under the order was $200,000, and the
judgment was for interest upon one-fourth of the amount. An
execution having been issued upon the judgment and a return made
that no property could be found, he applied for a mandamus
requiring the county court and the justices thereof to direct
Page 96 U. S. 212
the clerk of the county to draw a warrant on the county
treasurer for the balance of the judgment remaining unpaid, so that
he might be enabled, on its presentation, to have it paid in its
order out of the county treasury. His right to such a warrant, and
the duty of the county court to direct it to be drawn, are claimed
to be founded upon the general statutes of the state. The act
respecting the powers and duties of county courts (Wagner, Stat.
414, sec. 28) enacts as follows:
"Each county court shall have power to audit, adjust, and settle
all accounts to which the county shall be a party; to order the
payment out of the county treasury of any sum of money found due by
the county,"
and the thirty-first section provides that, 'when the court
shall ascertain any sum of money to be due from the county, they
shall order their clerk to issue a warrant therefor,' drawn upon
the county treasurer, prescribing the form. The thirty-second
section requires every such warrant to be drawn for the whole
amount ascertained to be due to the person entitled to the same,
and by the eighth section of the act, warrants are required to be
paid in the order of their presentation.
Such, in the main, is the case made by the relator. The
defendants concede the recovery of the judgment and the lawful
issue of the bonds, but aver that the charter of said company
expressly provided that the levy of a tax by the county court
should not exceed one-twentieth of one percent each year for the
payment of the bonds and the interest thereon. They further aver
that they have levied that tax; that they have no authority to
provide any other revenue fund for the payment of the said bonds or
interest, or any judgment thereon; that the relator is not entitled
to have his judgment paid out of any other fund; that the fund is
to be distributed proportionately among all the holders of the
bonds of the $200,000 issue; that there is no fund in the treasury
applicable to the bonds; and that they are not authorized to order
a warrant for the relator's judgment payable out of any other fund
than that derived from the tax of one-twentieth of one percent
authorized by that charter.
The provision of the charter mentioned in the pleadings is as
follows:
"It shall be lawful for the corporate authorities of any city or
town, or the county court of any county, desiring so to
Page 96 U. S. 213
do, to subscribe to the capital stock of said company, and may
issue bonds therefor and levy a tax to pay the same not to exceed
one-twentieth of one percent upon the assessed value of taxable
property for each year."
The statutes of the state make it the duty of the county court
to levy taxes for county uses not exceeding the rate of five mills,
or one-half percent. The tax of one-twentieth of one percent is an
authorized addition to this.
The United States demurred to the defense. The demurrer was
sustained and the petition dismissed. This writ of error was then
sued out.
Page 96 U. S. 214
MR. JUSTICE STRONG, after stating the case, delivered the
opinion of the Court.
The question presented by the record is whether the relator is
entitled to payment of his judgment out of the general funds of the
county, so far as the special tax of one-twentieth of one percent
is insufficient to pay it. And we think that he is thus entitled is
plain enough unless the act which gave the county authority to
issue the bonds directs otherwise. That act gave plenary authority
to the county to subscribe to the capital stock of the railroad
company and to issue bonds therefor, but imposed no limit upon the
amount which it empowered a county to subscribe, and for the
payment of which authority was given for the issue of county bonds.
This was left to the discretion of the county court. So it has been
held by the supreme court of the state.
State v.
Shortridge, 56 Mo. 126. A limitation was, however, prescribed
for the special tax which was allowed to be levied. But that was a
special tax, distinct from and in addition to the ordinary tax
which by other statutes the county court was authorized to levy,
probably supposed to be made necessary by the new liabilities the
county might assume. There is no provision in the act that the
proceeds of the special tax alone shall be applied to the payment
of the bonds. None is expressed, and none, we think, can fairly be
implied. It is no uncommon thing in legislation to provide a
particular fund as additional security for the payment of a debt.
It has often been done by the states, and more than once by the
federal government. The Act of Congress of Feb. 25, 1862, 12 Stat.
346, set apart the coin paid for duties on imported goods as a
special fund for the payment of interest on the public debt and for
the purchase of one percent thereof for a sinking fund; yet no one
ever thought the
Page 96 U. S. 215
obligation to pay the debt is limited by the amount of the
duties collected. Limitations upon a special fund provided to aid
in the payment of a debt are in no sense restrictions of the
liability of the debtor. Why, then, must not the special tax of
one-twentieth of one percent be regarded as merely an additional
provision made for the payment of the new debt authorized, rather
than as a denial to the creditors of any resort to the ordinary
sources from which payment of county debts is to be made? Why
should such a provision be construed as placing the holders of the
bonds in a worse situation than that of other creditors of the
county? These bonds are a debt of the county as fully as is any
other liability. Had the act which gave power to the county to
issue them said nothing of any special tax, there could be no
question that the holders of the bonds, like other creditors, would
have a resort to the money in the county treasury collected for the
discharge of its obligations; for it is by the law made the duty of
the county court to order the payment out of the county treasury of
any sum of money found by them to be due from the county. It would
therefore have been the court's duty to direct its clerk to issue a
warrant for payment, as in other cases. And surely it is not to be
held, unless such a construction of the statute is absolutely
necessary, that when the legislature authorized the county to incur
the debt, it intended to deny to the creditor the right to look to
the treasury of the county for its payment -- in other words, that
the debt was sanctioned, but that it was stripped of the usual
incidents of a debt, and the debtor was relieved from attendant
liabilities. And it is not to be inferred from a provision giving
the creditor the benefit of a special fund that it was intended to
place him in a worse position than that he would have occupied had
no such provision been made. And that too in the absence of any
direction that he must look exclusively to that fund. Such is not a
reasonable construction of the statute. Such is not a fair
implication of its purpose. It accords neither with its letter nor
with its spirit. Yet it is for such an implication the defendants
contend, and upon it their case wholly rests.
The bonds, as we have said and as is conceded, are an authorized
debt of the county. The purpose for which they were authorized is
manifest. It was to furnish aid to the construction
Page 96 U. S. 216
of a railroad in which the public, and especially the County of
Clark, were thought to be interested. The bonds, it is to be
presumed, were intended to be for sale in the market, and it was
the obvious intent alike of the state, of the railroad company, and
of the county that they should bring the highest price possible.
For this reason, probably, the tax of one-twentieth of one percent
was authorized, with a view to give to them additional credit, to
make them more salable, and to enable the railroad company or the
county to obtain for them a larger price. Surely it could not have
been to depreciate their value and make them almost worthless in
the market. It was said during the argument, and not denied, that
the taxable property of the county is valued at $3,700,000. A tax
of one-twentieth of one percent upon that sum, taking no account of
exonerations and failure to collect, would yield only $1,850, less
than one-eighth of the annual interest of the debt authorized and
incurred. It is incredible that the legislature intended to deny to
the purchasers of the bonds any right to look for payment beyond
such a meager provision, or if it was so intended, that the
intention would not have been expressed in precise terms. In the
absence of any express declaration that the creditor's right to
claim payment shall not reach beyond the fund derived from the
small special tax, we cannot think the legislature proposed
rendering the bonds unsalable or almost worthless in the hands of
those who might be so unfortunate as to hold them. Such an
intention would have defeated the object sought to be secured by
giving authority for their issue. Nor can we think that the
legislature intended to set a trap for purchasers and lead them to
suppose they were obtaining valuable securities when in fact they
would obtain what was worth next to nothing. The statute justifies
no implication of any such legislative intention. If it be said
that the legislature, in limiting the special tax allowed,
contemplated no issue of bonds beyond what one-twentieth of one
percent would pay, and did not anticipate the improvidence of
purchasers who might buy bonds issued in excess of that sum, it may
be answered that still a larger issue was in fact authorized. Such
an issue must therefore have been considered as possible. And it
would be absurd to hold that the legislative intent was to allow
the issue and
Page 96 U. S. 217
sale of county bonds for a sum more than one hundred times
larger than the debt acknowledged by them to be due and more than
one hundred times larger than the purchasers would be entitled to
recover.
We have been referred to the cases of
Supervisors
v. United States, 18 Wall. 71, and
State v.
Shortridge, supra, as sustaining the construction of the
statute contended for by the defendants. In fact, however, they
afford it no support. In the former of these cases, we held that a
statute of the State of Iowa conferred no power to levy a specific
tax to pay a judgment rendered against a county on warrants for
ordinary county expenditures, and we asserted that a mandamus will
not be awarded to compel county officers of a state to do any act
which they are not authorized to do by the laws of the state from
which they claim their powers. We adhere now to what we then
decided. But we have in hand no such case. The present is not an
attempt to enforce the levy of any special tax, or of any tax. It
asserts no power in the county court to levy a tax, which the
defendants deny they have. It claims only a right to share in the
product of a tax confessedly authorized. We do not, therefore,
perceive that the case has any applicability to the subject we have
before us. And
State v. Shortridge, though claimed to be
in point, is equally inapplicable when it is observed what the case
was and what was decided. It was a suit for a mandamus to compel
the county court of Macon County to levy a tax for the payment of
the principal and interest of several railroad bonds issued in
payment of a subscription by the county to the capital stock of the
Missouri & Mississippi Railroad Company. The bonds had been
issued by virtue of a legislative act similar to that under which
the bonds of the present relator were issued. The county had levied
the special tax authorized by the act, and the application was for
a mandamus to compel the levy of another tax specially for the
payment of the bonds, in addition to that allowed -- namely that of
one-twentieth of one percent. The court refused the writ, holding
that no other special tax was authorized by law than the one
mentioned in the charter of the railroad company, and, as that had
been levied, that there was no right to levy another. This was the
only question before the court, and the
Page 96 U. S. 218
decision is authority only to the extent of the case before it.
The court does not appear to have decided that the county court
could not levy a general tax for the expenses and liabilities of
the county. It was only called upon to consider how far an
extraordinary or special tax could be levied. The case called for
nothing more, and if more was intended by the judge who delivered
the opinion, it was purely
obiter. In the present case, as
already said, there is no effort to enforce the levy of any special
tax.
Upon the whole, therefore, we think the relator is entitled to
the mandamus for which he prays.
Judgment reversed, with instructions to give judgment on the
demurrer to the return against the respondents.
MR. CHIEF JUSTICE WAITE, with whom concurred MR. JUSTICE MILLER
and MR. JUSTICE BRADLEY, dissenting.
I am unable to concur in this judgment. I think the act under
which the bonds were issued limited the power of taxation for their
payment, and that the holders are chargeable with notice of the
limitation. The debt authorized was one payable from a particular
fund. If the fund is deficient, the legislature alone has the power
to grant the necessary relief.
