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,
Page 139 U. S. 343
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
Page 139 U. S. 344
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.
Page 139 U. S. 345
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
Page 139 U. S. 346
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
Page 139 U. S. 347
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
Page 139 U. S. 348
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.
Page 139 U. S. 349
MR. JUSTICE BREWER, after stating the facts as above delivered
the opinion of the Court.
The bill in equity in this case was based on the judgment at
law. That judgment determined the direct liabilities between the
parties. It absolved the defendant from any primary obligation of
debtor to creditor. It left it chargeable only as trustee of a fund
out of which plaintiff's claim was to be paid. It was like a
judgment which, in fact against an estate, is nominally entered
against the administrator thereof, to be satisfied out of the
property of the estate, and not out of the individual property of
the administrator. The propriety of this judgment has not been
questioned. No proceeding for review or reversal has been
instituted. It has been accepted by the complainant as a correct
adjudication of the rights between the parties, and in passing it
may be observed that its adjudication of rights was unquestionably
correct. The scope of the entire legislation, from its inception in
1858 to its close in 1872, was local improvements for the benefit
of adjacent property, with payment only through special
assessments, and did not contemplate a work of general benefit
whose expense was chargeable to the municipality at large. The
legislation of 1858, 1859, and 1861, under which the work was
commenced, ignored the municipality entirely. It subdivided an
area, of which the city was a portion, into draining districts, and
cast upon a board of commissioners for each draining district the
responsibility of the work and the assessments. The scheme was one
of special assessments, as distinguished from municipal tax for
general benefits. The distinction between the two is obvious and
well recognized. It is stated by Cooley
Page 139 U. S. 350
in his work on Taxation, page 416:
"The general levy of taxes is understood to exact contributions
in return for the general benefits of government, and it promises
nothing to the persons taxed beyond what may be anticipated from an
administration of the laws for individual protection and the
general public good. Special assessments, on the other hand, are
made upon the assumption that a portion of the community is to be
specially and peculiarly benefited in the enhancement of the value
of property peculiarly situated as regards a contemplated
expenditure of public funds, and, in addition to the general levy,
they demand that special contributions, in consideration of special
benefit, shall be made by the persons receiving it. The justice of
demanding the special contribution is supposed to be evident in the
fact that the persons who are to make it, while they are made to
bear the cost of public work, are at the same time to suffer no
pecuniary loss thereby, their property being increased in value by
the expenditure to an amount at least equal to the sum they are
required to pay. This is the idea that underlies all these
levies."
While the acts of 1871 and 1872 bring the municipal defendant
into a scheme for subsequent duties, they do not bring it in as a
primary debtor, for whose benefit the work is to be done, but
simply as the agency by which the special assessments are to be
collected -- the trustee, as it were, of the special assessments
for the benefit of the contractor. So that, while the judgment at
law measures the rights and obligations of the parties to this bill
in equity, if we were at liberty to look beyond the judgment to the
antecedent facts, we should be compelled to hold that the judgment
rightfully determined those obligations; that the city never was
chargeable with the burden of primary indebtedness, but stood to
the plaintiff only as assessor and collector of the special
assessments. Properly accepting this judgment at law as an
adjudication of the measure of his rights against the city, the
complainant charges the defendant with three violations of duty out
of which he claims a recovery. He charges, in the first place, that
the city did not collect these assessments when it ought to and
could have done so. Secondly, he says that, as owner of streets and
public
Page 139 U. S. 351
grounds, it was directly liable to the drainage fund for a large
amount, which it has not paid, and that therefore its failure as
collector to collect from itself as debtor to the fund authorizes a
court of equity to proceed directly against it for those unpaid
assessments. And thirdly, he says that by the purchase under the
authority of the act of 1876 the city assumed the duty of
completing the contemplated work; that, failing to do so, it became
responsible for all injuries resulting from such noncompletion, and
that in consequence of such noncompletion, anticipated collections
failed, and special assessments became noncollectible, and the
failure becomes a proper ground of recovery against the city for
any amount which could have been, but was not, collected.
Before considering these matters, it should be premised that to
the extent that the City of New Orleans may be considered a
trustee, it is a compulsory, and not a voluntary and contractual,
trustee. The legislation of February 24, 1871, by which for the
first time it became connected with these local improvements and
assessments, gave it no option as to price or party, but,
prescribing and naming both, gave it simply discretion as to the
places and extent of the work. It authorized and empowered the
canal company to dig the works, and fixed the price therefor. The
obligations cast upon the city were purely statutory, and while
they were, in respect to the party doing the work, and the
collection of assessments, somewhat in the nature of a trust, they
are more to be regarded as statutory obligations, a failure to
discharge which puts less strain on the moral sense. Indeed, the
statute connects rather the officers of the city than the city
itself with the work. It is true, the act provides that the title
to the lands necessary for the works shall be procured and held for
the benefit of the City of New Orleans; but it requires that such
title shall be so procured and held by the Board of Administrators
of the city. It also provides that the extent and nature of all
improvements shall be designated by such board, and that such board
shall be required to build and run all works and drainage machines
necessary to lift the water from the drainage canals over into Lake
Pontchartrain, and to do all other work necessary
Page 139 U. S. 352
to facilitate the work of the contractor selected and employed
by the state. The administrator of accounts was directed to draw
the warrants on the administrator of finance for the work done. All
the assets and assessments accumulated and made under the prior
statutes were transferred to the board of administrators of the
city. The prior assessments were confirmed and made exigible at
such time and in such manner as the board of administrators might
designate, and such board was authorized to make an assessment of
two mills per superficial foot. So that, while the title of the act
is "to provide for the drainage of New Orleans," and while the city
comes into the statute as a party to be ultimately benefited, and
whose officers are charged with the administration, yet nowhere in
its sections is the burden and duty of the work cast upon the
municipality as such. The paramount idea of the statute seems to be
not the casting of a duty upon the city, to be discharged in such
manner and by such means as it shall select, but rather to transfer
from the boards of the original draining districts to certain
officers and agents of the city the duty of carrying into effect
the drainage system.
We do not mean to be understood as affirming that no duty or
liability was cast upon the city by this statute as such, or that
the action of the city council thereafter, and on April 27, 1871,
was not within at least the implication of the statute. All we mean
to say is that neither the full power nor the general duty was cast
upon the city, and that the designation of its board of
administrators as the agency to carry on the work of drainage
already undertaken by statutory direction by the local boards of
separate districts placed upon the city only a limited
responsibility for that which such board might do or omit to
do.
The significance of these observations is clear. There is wide
divergence in the authorities as to the circumstances under which
the liability of a city to a contractor for local improvements
arises in case of the nonpayment of the special assessments. Into
that field of inquiry we do not care to enter.
See 1
Dillon on Municipal Corporations, 4th ed., section 481 and
following, and notes.
Page 139 U. S. 353
If ever there was a case in which the responsibility of a city
should be narrowed, this is one. By the legislation of the state it
was denuded of all freedom of action. It had no choice of
contractor or price. Neither the property to be taxed nor the means
or method of collecting the assessments was entrusted to its
discretion. This is not a case in which there was a failure on the
part of the legislative body -- the city council -- to prescribe
and provide sufficient machinery for the collection of assessments.
No superintendence of the financial department, whether as to the
property to be assessed, the amount of the assessment, or the
collection thereof, was entrusted to the municipality. All this
financial power was placed directly, by state action, without its
consent, in one of its official boards. Thus denuded of freedom of
action, it may properly insist upon the narrowest limits of
responsibility. If the financial duty was devolved without its
consent upon one of its administrative boards, and such board was
derelict of duty, it may properly say to a complaining party, "Your
remedy was mandamus to compel prompt and efficient action by that
board." In respect to a kindred question -- the neglect of the city
council -- Judge Dillon pertinently asks:
"Why should all be taxed for the failure of the council to do
its duty in a case where the contractor has a plain remedy by
mandamus to compel the council to make the necessary assessment,
and proceed in the collection thereof with the requisite
diligence?"
Section 482, 1 Dillon on Municipal Corporations, 4th ed.
If that suggestion be pertinent where the dereliction is that of
the city council -- the legislative assembly of a city, the body
charged primarily with the duty of making suitable provision for
the discharge of all municipal obligations -- how much more is it
true when such general legislative assembly is without power, and
charged with no duty, and full responsibility rests with a separate
administrative board. The contractor is specially interested in the
full and prompt discharge of its duty by this administrative board.
The remedy of mandamus is open to him to compel its action. On what
principle of right and justice can be ignore this remedy, and
charge the municipality and burden all the tax payers of the
city?
Page 139 U. S. 354
But, supposing the dereliction of this board of administrators
was an omission on the part of the city, what then, under the facts
of this case, would be the measure of liability? It will be noticed
that neither expressly nor by implication was there any guaranty of
payment, as appeared in the case of
Memphis v.
Brown, 20 Wall. 289. Whatever obligations were
assumed were only those of collection. The mere fact of
noncollection does not prove dereliction of duty. From 1858 to
1871, this drainage work, with the duty of assessment and
collection, was vested in certain local boards. The total
assessments during those years amounted to $1,433,152.25. The
amount collected in cash and warrants was $334,941.62. In addition,
there was transferred to the commissioners, on nonpayment of
assessments, lands of the nominal value of $171,239.11, or a total
collection of about half a million on a million and a half of
assessments. It stands to reason, and scarcely needs the support of
testimony, that during these many years the available assessments
were collected, and that what remained -- which was the large bulk
-- was charged upon property not worth the assessment, and for that
reason was not collectible. The testimony of Mr. Guthrie, who was
the representative of the canal company and its assignee, is "that
he would not take the property bought in by the commissioners for
nonpayment of assessments and pay the taxes thereon." If they,
during these many years, were unable to collect but a small
fraction of the assessments in cash, if the property they took was
not worth the taxes, what can be said of the balance, or the
possibility of enforcing the collection of assessments thereon?
Further than that, we are not limited to mere matters of
inference. It appears affirmatively that the city provided an
office and officers for the collection of these taxes, and,
according to the testimony given by the assignee of the canal
company, the officer in charge was diligent in his efforts to
collect the tax. It appears also that the canal company had an
agent to look after this matter of collection of taxes, who offered
all reasonable inducements to secure their payment. Again, the
assignee of the canal company, pursuing the remedy
Page 139 U. S. 355
which was open to him, of mandamus to compel the seizure and
sale under proper writs of the real estate subject to these
assessments for the payment of certain warrants, secured an order
of the court therefor. Fifteen hundred and seventy-one writs were
issued in obedience thereto, and the gross proceeds of these writs
was $32,466.69. It needs not the supporting testimony of the agent
of such assignee to induce the belief that the most available
property was that pursued by these proceedings. Still further, the
efforts to collect were largely hindered by two decisions of the
Supreme Court of Louisiana. One, in the case of
Succession of
Irwin, 33 La.Ann. 63, by which practically the creation of the
fourth drainage district, and the assessments therein, were
declared null and void, and the other in the case of
Davidson
v. The City, 34 La.Ann. 170, in which it was ruled "that a
judgment for a drainage tax will not be enforced when it is shown
that the property, for from being benefited, was injured by the
alleged drainage."
When to all these is added the fact that large portions of these
draining districts were swamp and overflowed lands; when one of the
burdens of complaint here is that the city, by failing to complete
this work of drainage, had left the lands in such condition as to
be of practically no value, it is obvious that if the duty of
collection rested primarily and absolutely on the city, it would be
difficult to hold it derelict of duty therein, and renders very
pertinent the language of the learned circuit court which decided
this case in the court below, 38 F. 779:
"As to failure to collect, when these assessments were handed
over to the city to collect they had been assessed 13 years, and
for that period had been in the hands of commissioners created
expressly for the conduct of the drainage system, and with no other
business. If such bureaus had failed to collect for such a period,
the inference is strongly forced upon us that the assessments were
substantially uncollectible, especially by a municipal corporation,
herself crushed by debts. This is corroborated by the outcome of
the mandamus proceedings taken by Van Norden, transferee of the
company, and as warrant holder, to compel the city to
Page 139 U. S. 356
issue writs of
fieri facias against the owners in 1876.
To the application for that writ the city answered that the cost of
the proceeding would equal, in her opinion, the amount realized.
The result showed her estimate to be nearly correct, for the cost
of the 125 writs selected by the warrant holders, and therefore
presumably the best for the purpose, was $34,000, and the amount
collected under them only $36,000."
The second contention is that the city was itself a debtor to
this drainage fund for nearly $700,000; that it had misappropriated
a portion of the fund which it did receive; that as trustee of
these assessments it was its duty to collect from itself as debtor
to such fund, and that, having failed so to do, it can be properly
charged in this proceeding. Considerable discussion took place on
the argument, and is also found in the briefs, as to whether
streets and other public property can be subjected to a lien for a
share of the cost of local improvements, or whether the city stands
in such relation to these properties that it can be held liable as
owner. It is unnecessary to enter into the merits of this
discussion. It may be that streets and other public grounds cannot
be sold for nonpayment of assessments for local improvements or
other taxes, and it may be that the city is not technically their
owner, and yet at the same time it may be true that the city, as
representing the public, may, under proper proceedings, be charged
as debtor for the proportion of the cost of local improvements,
which, by the rule established, would fall upon such public
property.
Neither do we need to examine the various decisions of the
Supreme Court of Louisiana, cited by counsel, or seek to determine
what is the law of that state in respect to this matter. For the
purposes of this case, we assume that the various assessment
proceedings, taken in connection with the decision of the supreme
court approving the homeologation of the tableaux, 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 that share of the total cost of the drainage determined by the
proportion of the superficial feet of streets and other public
grounds to the entire area of
Page 139 U. S. 357
the drainage districts. Upon that assumption, the obligation of
the city to the drainage fund amounted to several hundred thousand
dollars. Assuming that to be true, the contention of appellee is
that it has paid into that fund far more than such amount. It is
admitted that the city has issued $1,600,000 of its own bonds,
taking up thereby a proportionate amount of the drainage warrants.
It is not questioned by complainant that, if this issue of bonds is
to be taken as a payment of its indebtedness to the drainage fund,
its obligations to that fund have been fully discharged, and, in
addition, that the amount of such contribution in excess of its
obligations to that fund more than covers all alleged
misappropriations thereof. In other words, the $1,600,000 exceeds
both the obligations of the city to the fund and its alleged
misappropriation of any part thereof. But the contention of
complainant is that there is nothing in the legislation, the
ordinance, the warrants, the bonds, or other proceedings which
expresses an intent to make this contribution one in discharge of
such indebtedness, and that if it simply gave these bonds to the
fund, if other and ultimate corporate benefit was the consideration
of their issue, it cannot be affirmed that they were intended or
ought to be taken as payment of the original obligation created by
the assessment proceedings. The answer to this view is clear and
just. It is true that ordinance number 814, which provides for the
refunding of warrants into city bonds, contains no declaration that
such refunding shall be in discharge of the city's obligation as
assessee to the drainage fund, and that the assessment proceedings
contain no receipt or release of the city as assessee by reason of
its issue of bonds. On the face of the record, there is no
discharge of the city's obligation as assessee, and if we rest upon
the letter, it perhaps could not be denied that the city is still a
debtor to that fund; but equity looks beyond the form to the
substance of things, and these are substantial facts: for thirteen
years, a drainage system had been in force, in respect to which the
city had no duty and no obligation other than as supposed owned and
assessee of certain public grounds. The assessment proceedings had
proceeded
Page 139 U. S. 358
so far that there was a large apparent obligation of the city to
the drainage fund. In 1871, an act of the legislature is passed,
empowering the canal company to complete the work, transferring to
a subordinate administrative body of the city all assessments
theretofore made, and imposing upon it the further duty of
assessment and collection. No provision is made by the legislative
act for payment for the work done or to be done otherwise than
through the collection of these local assessments. In that
emergency, the city, by ordinance, says to the contractor named by
the state:
"Go on with the work, and if the warrants issued in payment
therefor be not satisfied out of the assessment collections at the
end of the year, they may be exchanged for city bonds."
The work progresses, and warrants are issued and exchanged for
city bonds, which have passed into the markets of the world, and
remain the undisputed obligations of the city, and to an amount far
in excess of all the assessments charged against the city. In other
words, the city, as assessee, owing the drainage fund a certain
debt, puts into that fund twice the amount of the debt. Can any
creditors of that fund thereafter equitably charge the city as
debtor to that fund, because when it put its moneys into that fund
it did not in express language say, "I put these in in discharge of
my indebtedness?" It will be borne in mind that no new
consideration passed from the contractor for this contribution of
the city to the drainage fund. No legislative act contemplated
direct obligation on the part of the city. From first to last, all
meant local improvement, to be paid by special assessments, and the
contractor, all these years, had only legislative authority to look
to the special assessments for payment. Its contract was entered
into and performed with knowledge that the only legal right it had
for payment consisted in these assessments. Without further
consideration, the city put into this fund these bonds, and they
were accepted by the contractor. It is doubtless true that the
motive of the city was to anticipate the collection of the
assessments, and to put into the hands of the contractor available
assets to insure speedy performance of the work, but the obligation
of the contractor was to do the work, and it gave no new
obligation,
Page 139 U. S. 359
no new consideration, to the city or any other party for these
bonds. To say after this contribution of the city to this fund -- a
contribution without consideration except in discharge of its debt
to the fund -- that because it was not expressed that the
contribution was to be taken as in discharge of the indebtedness, a
court of equity will permit the contractor or its assignees to
treat the contribution as a donation and charge the contributor as
a debtor would be a mockery of justice and an insult to equity. It
must be borne in mind that a city is not like a private individual,
with absolute freedom of contract and donation. It is simply the
representative of the citizens and taxpayers, a trustee for their
interests. It has no general powers of donation, and its
contribution to a fund can never be considered as a donation when
there is an indebtedness to that fund to be discharged. Indeed, if
there were no indebtedness, the contribution as a whole might well
be considered as
ultra vires, and if, by the issue of
negotiable securities to that fund, an indefeasible obligation had
been assumed by the city, it might in equity hold that fund as
debtor to it for such amount. Much stress is placed by counsel for
appellant on this point, and large reliance is placed on the fact
that in these bond transactions there was no declaration of an
intent to appropriate them to the payment of the city's
indebtedness as assessee; but, as we have indicated, such omission
does not militate against the rights created by the contribution.
If the city, as assessee, owed this fund $700,000, it may
rightfully answer to any demand of the contractor or its assignees
that it pay such amount into the fund, "I have already paid it,"
and it is no reply to that answer to say, "When you paid it, you
did not declare that you paid it in discharge of that
indebtedness." It is enough that the city paid it, and paid it
without other consideration than the discharge of its indebtedness.
We think this contention of the appellant must also fail.
The remaining proposition is that, under the authority of the
Act of February 24, 1876, the city purchased from the canal company
and its transferee all rights, franchises, and privileges
possessed, and all tools, machinery, and apparatus
Page 139 U. S. 360
belonging to said company or its transferee; that, having made
such purchase, it abandoned the work then incomplete, and that the
failure to complete the work left large portions of the realty
within the drainage districts of comparatively no value, and thus
rendered impossible the collection of the assessments. One
satisfactory answer to this is that the testimony indicates that if
the work contemplated had been completed, the property would have
still remained in its valueless condition of swamp and overflowed
lands, without other and further work. It would, to say the least,
be ignoring the significance of a large amount of testimony to hold
that if the work as contemplated had been finished, the lands would
have been drained and made valuable; but we do not base our
decision upon the results of a completion of the contemplated work.
We rather place it upon the other ground -- that a municipality
which abandons a contemplated and intended work of public
improvements assumes thereby no obligation to any parties who have
invested on the faith and expectation of benefit from the
completion of the work. When a city or state contracts with an
individual or company for the doing of certain work, the right
remains to the contracting parties at any time to abandon that
work. No obligation arises to third parties who become interested
in one way or another in the completion of the work. There is no
guarantee that the contracting parties may not at any time abandon
it, or, abandoning it, that any contingent, further, and
speculative liability will arise in favor of such third parties.
When the city bought out the contractor, it did not assume his
debts. A municipality may, with the consent of its contractor, at
any time abandon contracted work. Such abandonment does not make
the city liable for the debts of the contractor. So, when the city
purchases from the contractor his property invested and his rights
existing in the contract, such purchase creates no assumption of
his debts. Having purchased, it may abandon the work, and creditors
of the contractor cannot charge it as debtor on the theory that if
the work had been completed, their claims would have become of
value. Into every contract between a municipality and an individual
there enters, as between a contract between
Page 139 U. S. 361
two private individuals, the right of determination at any time
by agreement of parties, and such abandonment creates, as to third
parties, no other or higher rights as against either the
contracting parties than existed at the time of the mutually agreed
upon abandonment. This contention also of complainant must
fail.
We have given this case long consideration. The multitude of
facts presented, the large interests involved, and the learned and
cogent arguments of counsel have compelled such consideration. We
appreciate fully the appeal made by the distinguished counsel for
complainant in closing his argument with this quotation from the
opinion of three of the Justices of this Court in
Meriwether v.
Garrett, 102 U. S. 472,
102 U. S.
520:
"It is certainly of the highest importance to the people of
every state that it should make provision not merely for the
payment of its own indebtedness, but for the payment of the
indebtedness of its different municipalities. Hesitation to do this
is weakness; refusal to do it is dishonor. Infidelity to
engagements causes loss of character to the individual; it entails
reproach upon the state."
And we trust that this Court will never falter in its duty of
brushing away all false pretenses and holding every municipality
obedient to the spirit as well as the letter of all its contract
obligations. At the same time, it is equally the duty of this
Court, as of all others, to see to it that no burden is cast upon
taxpayers, citizens of a municipality, which does not spring from
that which is justly and equitably a debt of the municipality, and
when a contract for local improvements 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 on the part of the city, neither justice nor equity will
tolerate that it be charged as debtor therefor.
The decree will be
Affirmed.
MR. JUSTICE HARLAN, with whom concurred MR. CHIEF JUSTICE FULLER
and MR. JUSTICE LAMAR, dissenting.
THE CHIEF JUSTICE, MR. JUSTICE LAMAR, and myself are unable to
assent to the opinion of the Court in this cause, and
Page 139 U. S. 362
I will state as briefly as possible the view we take of the
three controlling questions involved: whether the city became
debtor to the drainage fund for the assessments on the streets and
other public places; whether it is liable as trustee for the
individual assessments uncollected, and whether its debt and
liability, if any, has been discharged either directly by payment
or indirectly by an equitable set-off.
Did the City of New Orleans become debtor to the drainage fund
for the assessments upon the streets, squares, and other public
areas? Counsel for the appellee contend that it did not, and in
support of that position rely upon several propositions the first
of which only demands notice.
It is contended that as the City of New Orleans and the Parish
of Jefferson were not by the acts of 1858, 1859, and 1861 expressly
declared liable, or given anything to do with the execution of the
works in question, which works were of the kind usually constructed
at the expense of the individuals benefited, the legislature did
not intend that the city and parish should be numbered among the
contributors, and that, as a general rule, such assessments are not
construed to include public property.
The questions raised on this proposition involve the powers,
capacities, and liabilities of the City of New Orleans, a municipal
corporation of the State of Louisiana, and consequently a part of
its governmental machinery, a fact to be kept steadily in view when
questions of the legislative power are being examined, and
furthermore, the conclusions of the Supreme Court of Louisiana on
those questions, even if they are different from the usual holdings
-- and we do not mean to imply that they are -- should have great,
if not controlling, weight with this Court. It seems to us that
this point has been settled by that tribunal. The case at bar does
not present the first instance in the history of New Orleans of the
experiment of drainage based on area taxation. In the year 1835, a
company was incorporated for that purpose in which the city was a
stockholder. The company taxed every foot of land, including
streets, etc. Litigation ensued. The point of liability was
directly raised and distinctly decided. The supreme court
Page 139 U. S. 363
sustained the tax on the streets and said:
"The large proportion of the expense by which this burden is
thrown upon the city for these streets meets in some measure that
equity which has been urged upon our consideration, that, as the
work has been undertaken for the public good, the public ought to
bear the charge of it notwithstanding the benefit to the owner of
the soil."
Draining Company, Petitioner, 11 La.Ann. 338, 343.
Indeed what could be more just than that a local assessment,
directly beneficial to all, should, in some form and to some extent
at least, be provided for by a general contribution? Why should the
cost of it be defrayed by one species of property alone? And how
obtain that contribution more simply than by an assessment on the
public property, although such assessment may not be enforceable by
a sale, and must be otherwise provided for?
The decision above quoted was made in the year 1856. Two years
later, the first of the statutes now under consideration -- that of
1858 -- was passed. It is hardly conceivable that the legislature
which passed that act were ignorant of the decision of 1856, or of
the construction placed upon the statute of 1835. Or that, knowing
it, they still intended to produce a different result in the act of
1858 not by adopting different, but by reproducing almost the
identical, terms. The latter statute is substantially, indeed
almost literally, a reproduction of the former, and that former
statute had just been construed by the supreme court.
In the case of
Marquez v. New Orleans, 13 La.Ann. 319,
the court held that the city, as the owner of the middle ground, or
public promenade, running along the center of Claiborne Street, was
liable for one-half of the cost of improving that street, and in
the case of cross-streets was liable for the whole cost, since as
to these parts there were no abutting owners. The city was treated,
and the case decided, exactly as if it were an individual
proprietor.
So, also, in the cases of
Correjolles v. Succession of
Foucher, 26 La.Ann. 362, and of
Barber Paving Co. v.
Gogreve, 41 La.Ann. 251, a question arose in respect to the
ownership by the City of the public places, and the same conclusion
was
Page 139 U. S. 364
reached. How these cases may be reconciled with that of
Xiques v. Bujac, 7 La.Ann. 503, cited by the counsel for
appellee to the point that public places are not held in fee, and
that the term "title" is not applicable to them, or whether they
overrule it, and all similar questions, are immaterial inquiries.
The court, in the four cases cited, held the city to be a
proprietor, in the contemplation of the laws providing for local
assessments, and in the absence of any express statutory direction
on that point, and such is the exact question here. We therefore
consider that question settled, especially when considered in
connection with the fact that these assessments have been reduced
to judgments and confirmed by courts of competent jurisdiction, the
validity of which, as well as the regularity of the assessments,
have been recognized and approved by the Supreme Court of
Louisiana.
ate of Louisiana ex Rel. Van Norden v. Mayor &c.
of New Orleans, 27 La.Ann. 497.
We now advert to the claim of the appellant that the city is
liable for the drainage fund as delinquent trustee. That liability
is asserted on three distinct grounds: 1st, because the city
unjustifiably failed to collect the assessments due the fund; 2d,
because if failed, as subrogee of the original contractor, to
continue the work of drainage, and thus secure, under the decisions
of the Louisiana courts, the collectibility of the assessments; 3d,
because she has paid out moneys belonging to the fund for purposes
not permitted by the law. A short outline of some of the history of
these matters will be proper.
The act of 1858 established the first, second, and third
drainage districts; organized a district board in each, with full
control of the drainage in that district; gave the board the power
to levy a uniform assessment per square foot on the land to be
drained, not to exceed $350,000 in the aggregate in each district;
made the assessments first lines on the lands assessed; provided,
in case of nonpayment, that judgment therefore should be
recoverable in any court of competent jurisdiction; that lands be
sold for arrearages, costs, and interest, and that the respective
boards might purchase the same and hold or dispose of them for the
benefit of the districts.
Page 139 U. S. 365
The act of 1859 authorized the boards to borrow $350,000 for
each district and to issue bonds therefor, and directed the boards,
on issuing bonds, to make assessments in conformity to the act of
1858, to be collected in not less than ten annual installments, and
to be applied exclusively to the payment or purchase of such bonds,
and the payment of the interest thereon.
The act of 1861 provided that copies of the assessments made as
above should be filed in certain designated courts, and, after
notice, approved and homologated, and that they should then
constitute judgments against the property assessed and the owners
thereof, on which executions might issue as on judgments rendered
in the ordinary mode, and that ten percent be added to pay counsel
fees and costs.
Under these statutes, the boards organized, made the
assessments, caused some of them to be homologated, collected a
portion of the money, and did some of the work. Until 1869, they
continued to exist and to be more or less active in discharging
their duties. The system, however, did not prove satisfactory, by
reason of the absence of responsibility and of unity of action on
the part of the several boards. The act of 1869 therefore
consolidated the districts, abolished the boards, and appointed a
commissioner, who was to succeed to their property, collect the
assessments, and levy and collect others on such parts of the
district as were not included in the tableaux turned over to him.
The commissioner, however, was not to do the work. That was to be
done by a company, which was to receive all the collections in
return for certain work.
By the act of 1871, an entirely new scheme was devised. The
Mississippi and Mexican Gulf Ship Canal Company was authorized to
do the work needed; the city board of administrators was empowered
to locate the canals and levees, and required to build and run the
machines necessary to lift the water over from the canals into the
lake; the city surveyor to furnish the company monthly estimates of
the work done, on which warrants were to be issued by the city
auditor; the city treasurer to pay those warrants from any funds in
the Treasury to the credit of the company, and if there was not the
money
Page 139 U. S. 366
necessary, to endorse the date of presentation, the warrant to
bear interest therefrom. To provide the necessary funds, all the
assets and the assessments provided for by the acts of 1858 and the
various acts supplementary thereto were transferred to the city,
and the city was subrogated to all the rights, powers, and
faculties thereby conferred. The city was expressly required to
collect the assessments (which were at the same time made exigible
and confirmed) in time to provide for the payment of the warrants.
It was authorized to assess those lands in the three original
districts, and such others included in the levees as had not been
already assessed, the assessments to be enforced as in the prior
acts. All moneys collected were to be passed to the credit of the
company for the payment
only of the drainage of New
Orleans and Carrollton, and all property, not money, received to be
held in trust primarily for the same purpose and finally, if not so
needed, for the city.
Such were the circumstances under which the city became the
administrator and trustee of this important interest and fund, and
such were the duties imposed upon her by those capacities.
What, now, were the assets committed to her administration, and
for which there must manifestly be some sort of an account? They
were:
1. A balance uncollected of a levy
made in the first district, by the
original board . . . . . . . . . . . . $ 500,714.43
2. Ditto in the second district . . . . . 289,907.40
3. Levy made by the city, under the
act of 1871, in the third district . . 627,589.95
4. Ditto in the fourth district . . . . . 281,416.81
------------
Total amount chargeable . . . . . . $1,699,628.58
This sum includes the assessments
against the city, on account of public
places, admitted never to have been
paid, unless by issuance of bonds (of
which hereafter) . . . . . . . . . . . . 697,836.28
------------
Leaving due on account of
individual assessments . . . . . . . . . $1,001,792.30
Page 139 U. S. 367
These large assets having come to the hands of the city for the
purposes of a great public trust, it was bound to relieve itself of
the charge assumed by it in some way consistent with the rule of
reasonable diligence. In view of its antecedent agency and its
cooperative action in the creation of the trust and its more than
willing acceptance of it, added to the fact that it was the party
to be ultimately benefited, we are not prepared to accept the
theory that it was a compulsory, and not a voluntary or
contractual, trustee, a failure to discharge whose obligations puts
less strain upon the moral sense than if the obligations had been
purely statutory. And in this connection it is well to observe that
this bill was filed for the purpose of an accounting. A trustee,
city or not -- it is immaterial -- receives large assets, of which
its own liability forms a considerable part, and the simple
question is how shall it relieve itself of the charge? How does the
city do so in this case? Not by collection and disbursement
according to the law and her duty, for it is conceded that about
$1,400,000 was never collected. But --
(1) By a claim that the assessments were greater than the value
of the lands, and therefore that they could not be collected from
the lands. To this proposition there are several answers: first, as
well argued by counsel for the appellee, it cannot be generally
true in fact since the lands are those on which the great City of
New Orleans is built, and the assessments ranged from $69 to $140
per acre; second, in those instances in which the assessment was
greater than the value of the lands, if there were any such, then
the statute made provision by which the lands themselves, on
failure of the owners to pay, should be sold and bought in by the
city for the fund, and the duty of the city was to do this -- in
fact it was done by the original board of the fifteenth district in
the case of the asylum property; third, the statutes also provided,
as has been seen, that personal executions should be issued against
the owners for arrearages, damages, and costs, and there is no
showing, in our opinion, of anything like reasonable diligence in
the use of this valuable right -- a right which the supreme court
of the state, in 1874, recognized and adjudged.
Page 139 U. S. 368
We are impressed with the conviction that although under the act
of 1871 it was the duty of the city to press the collection of
these funds at the rate of about $25,000 per month, yet it did
nothing more than keep an office open at which the assessees might
voluntarily pay or not pay, as they wished.
(2) By a claim that the decision of the supreme court in the
Succession of Irwin, 33 La.Ann. 63, held that certain
personal judgments obtained by the summary processes given by the
act of 1871 were void, and nullified the homologation of the
tableaux for the entire fourth district. This decision was not
rendered until the year 1881, the city then having had charge of
this matter for ten years. The decision cannot, of course, be
successfully offered as an apology for the antecedent supineness of
so long a period. Prior to that, the Louisiana courts had been
enforcing the statute of 1871, as we have already shown. And
further, in regard to the
Irwin case, if it was of such
grave import as to effectually prevent the collection of these
moneys, then it was probably violative of contract rights, and on
proper proceedings could have been avoided. If it was not of such
import, then it is no answer to the obligation of the city to make
the collections aforesaid. In fact, the testimony in this case
would indicate that the city was deliberately obstructing, not
forwarding, the collection of these funds.
In December, 1873, after having failed to collect the taxes to
pay the warrants when due, the city adopted an ordinance allowing
the taxes to be paid in warrants, thus compelling the contractor to
sell at a discount or get no money at all. After collecting only
$88,000 in three and a half years, with warrants falling due at the
rate of $25,000 a month, and making no effort to collect except to
keep an office, and never having issued an execution up to January,
1875, the city then denied the right of the warrant holders to have
execution, and resisted the mandamus that resulted in the judgment
of the supreme court sustaining such right. The city did not make
any effort worthy of mention to collect the tax from the owners
independent of the land. After the purchase of the plant from the
contractor in 1876 under the statute passed to that end, and the
subrogation of the city to all the right of such contractor,
Page 139 U. S. 369
it deliberately abandoned the work, let the canals already dug
fill up, and the boats and other appliances, for which about
$300,000 of warrants were issued, rot unused. By reason of that
abandonment and the consequent noncompletion of the system, the
Supreme Court of Louisiana decided, in the case of
Davidson v.
City of New Orleans, 34 La.Ann. 170, that the tax could not be
enforced. In 1881, pending the decision of the
Davidson
case, the mayor, by direction of the council, issued a proclamation
advising the nonpayment of drainage taxes until the validity
thereof should be passed on by the supreme court, notwithstanding
the previous judicial history of these transactions. In 1883, the
council appointed a committee to investigate and report whether any
drainage taxes were being collected and by what authority, and
published in their proceedings the report whereby it was declared
the large amount of taxes due and outstanding were not collectible,
and in which was set forth the method by which the assignees might
get relieved from the assessments.
Such are substantially the charges made by the appellant to show
that the city, after seeking and accepting the trust, was opposing
its execution, instead of enforcing it.
(3) By a claim that the decision of the supreme court in the
case of
Davidson v. City of New Orleans, 32 La.Ann. 1245,
to the effect that a judgment for a drainage tax will not be
enforced where it is shown that the property received no benefit
from the drainage, was a great hindrance, as its effect was to
release from their liability for the assessment more than half of
the first and third drainage districts, and almost the whole of the
second. The ground of the decision was the abandonment by the City
of the work it was charged to do. It is manifest that the city
cannot relieve itself of the obligation to collect the assessments
avoided by its own default. To meet this proposition, the appellee
contends that the cost of completion would have been so great that
the assessments would have been more than exhausted in completing
the work, and the outstanding debt would have remained still
unpaid. There were and are uncollected $1,423,235.31, including
about $700,000 of the city's own assessment which should, under the
circumstances,
Page 139 U. S. 370
be considered money in hand. The appellee states the amount
necessary to have completed the system, as projected, "at nearly or
quite $700,000." The dues of the city alone would have completed
the work according to appellant's own statement and have left a
balance for the benefit of warrant holders of about $725,000.
But the appellee also claims that when completed there would
still have been lands in the district unbenefited on which the
total assessments would have amounted to $500,000, and that these
assessments, according to the
Davidson case, would not
have been collectible. If all that were correct, and if the city
had no other resources for finishing of work than these
assessments, still a margin of about $225,000 would have been left
for the benefit of warrant holders. On the other hand, however, we
cannot yield assent to the
Davidson decision. We cannot
and do not accept the proposition that where the legislature passes
on the necessity of a great public work like this and organizes a
district for its prosecution, the assessments made are void unless
the property assessed is directly and evidently benefited. What
question of that kind may exist is a question of the
district, not of the individual, properties. The
Davidson decision would wreck every work of a like
character we ever knew. The entire levee systems of the Mississippi
River would be swept away at once, for the taxes would be void as
to all lands above overflow from the river unleveed, and as to all
those which lie so low as to remain wet and untillable in the
absence of a supplemental system of drainage, even after the
completion of the levees. Admit the principle that these general
assessments or taxes are to be brought to the test of particular
benefits, and the most unexpected and disastrous consequences would
follow. Moreover, our criticism on the
Irwin case, as to
its violation of contract rights already fixed, applies to the
Davidson case, if possible, with even greater force.
(4) By a claim that the constitutional amendment of 1874, which
took effect on the 21st of January, 1875, in terms declared "that
the City of New Orleans shall not hereafter increase her debt in
any manner or form, or under any pretext." An answer to this claim
we do not think necessary.
Page 139 U. S. 371
The next point calling for our consideration is the proposition
of appellee that the liability, if it existed, has been discharged
either directly by payment or indirectly by an equitable set-off.
It was upon this ground the circuit court proceeded, and upon this
ground the opinion of the majority rests. This claim is based upon
the fact that, proceeding under Act No. 73 of 1872, the city
retired about $1,600,000 of drainage warrants by issuing for them
its own seven percent fifty-year gold bonds. The claim resolves
itself into two heads -- one of payment and one of set-off. But in
order to consider either, it will be necessary to advert again to
the history of those bonds. The act of 1858, inaugurating the
drainage enterprise, provided, as we have seen, for the expenses by
an assessment on lands, to be a lien on them reducible to judgment.
The act of 1859 authorized the issue of the bonds by the
commissioners of each district, not to exceed $350,000 in each
district, to the payment and purchase of which, and the payment of
interest thereon, the assessments were exclusively devoted. Then
followed the act of 1861, which made the assessments personal
liabilities on which, when reduced to judgment, common executions
might issue. Then the act of 1869 abolished the several boards of
commissioners in order to get rid of the obstruction arising from
want of harmony among them, appointed a commissioner for the entire
territory, and ordered the construction of the drainage canals to
be paid from the assessments so collected. Then came the act of
1871. It provides for certain canals and levees to be dug and
constructed by the Mississippi and Mexican Gulf Ship Canal Company,
for the supervision of the work, and the administration of the
funds, by the city, and for the application of the assessments,
when collected, only to drainage. Here first appears the direction
to draw warrants on account of work done, and it is directed that
if warrants were not paid on presentation, they should draw eight
percent interest. Provision was made for assessments in addition to
those already levied.
During all this there was evidently felt the pressure of the
actual fact that the assessments were not collected with sufficient
regularity and promptness to meet the urgent demands
Page 139 U. S. 372
of a scheme so extensive, as well as of the want of a more
acceptable security to contractors for the large expenditures
entailed. Therefore, two months after the passage of the act of
1871, the city ordinance provided that
"in case the warrants issued for drainage works to be done by
the Mississippi and Mexican Gulf Ship Company should not be paid
within one year out of the proceeds of the drainage taxes and
assessments, they should 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
principal."
Then followed Act No. 73 of 1872. This is the statute under
which the bonds in fact issued, and an analysis of which is
indispensable here. Its objects, as expressed in its title,
were:
"To authorize the Council of the City of New Orleans to levy a
police tax; to regulate the levies of taxes, the proceedings of tax
suits, and the jurisdiction of the district courts for the Parish
of Orleans in reference thereto; to define and punish forgery in
certain cases; to authorize the funding of the floating debt; to
consolidate, limit, and provide for the debt of the City of New
Orleans, principal and interest; to authorize a tax for the support
of the city government, and to establish a fiscal agency, defining
its duties, and for the better enforcement of the collection of all
taxes."
Section 13 of the act runs thus:
"SEC. 13.
Be it further enacted, etc., 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 and 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 or New Orleans, and at any other points that the council
may designate, with quarterly coupons, and that
Page 139 U. S. 373
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."
Proceeding under this statute, the city issued about $1,600,000
of the drainage bonds, taking up therewith warrants issued for work
done. It is claimed that in issuing those bonds, the city thereby
paid off both its own assessed dues to the drainage fund,
as well as discharged any liability it may have been under on
account of its nonfeasance or misfeasance as statutory trustee of
the fund. We cannot accept that view.
It seems to us clear that it was not the intention of the
legislature that such should be the effect of the issue of those
bonds. That intention must, of course, control, as it is a question
of the power of the municipality to issue negotiable bonds. The
section authorized a series of bonds to be issued, and directed
"that the bonds thus issued shall be called the new consolidated
debt of New Orleans." They were to constitute
one debt,
the
consolidated debt, not a variety of debts nor even two
distinct debts, and the statute manifestly proceeded on the idea
that this one consolidated debt is to be paid, as all city debts
are paid, out of the property of the city, and that without any
express declaration to that effect.
United States v. New
Orleans, 98 U. S. 381. The
purposes for which the bonds were to be issued were: (1) for
unbonded debts existing December 31, 1871, and unpaid at the time
of the passage of the act, or caused by receipts of certificates of
1871, (2) "for revenues proper of 1872;" (3) "and for excavations
and levees, drainage machinery, and revetments authorized by law,
or required for the protection of the city from
Page 139 U. S. 374
overflow or inundation" -- one as well as the other; one no less
than the other.
Now certain of those bonds were to be marked "Drainage Bonds."
What bonds, and why? The statute in words answers: "All issued for
the excavations and levees authorized by act No. 30 of 1871, or by
drainage laws previously enacted." No bonds could be lawfully so
marked except such as were issued "for excavations and levees;" not
for drainage machinery or revetments; not even for excavations and
levees to be thereafter made, unless they were such as the statutes
named authorized; not for excavations and levees previously made,
since they were already settled for by warrants, whatever such
warrants might be worth; still less for the debts or liabilities of
the city, however they may have been incurred. The city could not
properly thus mark any bonds issued for any purposes except those
expressly limited in the statute -- those issued in payment for
excavations and levees authorized to be made by the act of 1871,
and the preceding acts. And why? For a reason entirely in harmony
with the whole tendency of the entire series of statutes and with
the requirements of good faith to the contractors working under
those statutes -- for the purpose of expediting the work and of
giving increased value to those particular bonds.
The appellee contends that these bonds have only the force of
warrants, and could only be paid out of the proceeds of the
assessments already made, notwithstanding they had fifty years to
run before payment could be demanded at all. Not so. They were
privileged bonds in the series. And, besides the general liability
of the city, the statute provided that all the proceeds of
assessments not needed to pay off warrants, if any, coming in --
and in doing which the issue of that class was,
pro tanto,
prevented and rendered unnecessary -- should be an additional
special fund with which the city should purchase said bonds before
maturity at a price agreed on, not exceeding par, thereby giving
the bondholders, or some of them, if there were any such excess of
receipts, an option to get their money before maturity. Whether a
sound one or not, such was clearly the scheme, and it presupposed
the continued existence
Page 139 U. S. 375
and the continued collection of the assessments after the issue
of the bonds, and plainly excludes the idea that such issue is to
extinguish the assessments, or any of them. Not an intimation is
given of any difference between one class of assessments and
another -- those of the city and those of individuals. Therefore
the city had no power to issue such bonds for the purpose of paying
the assessments. It had, perhaps, the power to issue bonds of the
unmarked sort for that purpose if Van Norden, the transferee of the
company's rights, had consented to receive them for that purpose,
but it was not claimed that this was done or tried. The question is
as to the effect of the issuing of the marked bonds.
Moreover, in issuing these bonds, the city had no intention to
pay its assessments thereby, nor were they received with any such
intention or understanding by the receiver of them. This is amply
shown by the following facts:
(1) It was the regular custom to mark on the assessment rolls
all the payments made. No such entry was made in this case.
(2) The issue of bonds, after they were authorized, was always
and largely in excess of the homologated judgments against the city
on its assessments.
(3) Judgments were being constantly rendered against the city on
her assessment after she had issued bonds far ahead of even her
claimed liability, yet she never presented any claim for
payment.
(4) The city administrator of public accounts, in his report to
the city council, July 1, 1872, said that the city had already
issued certificates for $485,081 of the new consolidated bonds,
drainage series, and he states the amount due by the city for the
streets to be $763,378.69, the total amount originally assessed
against the city. On the theory of payment, it would have been only
$258,297.69. To constitute payment, money or some other valuable
thing must be delivered by the debtor to the creditor for the
purpose of extinguishing the debt, and the creditor must receive it
for the same purpose.
Dodge v. Freedman's Sav. & Trust
Co., 93 U. S. 379,
93 U. S. 386;
Ketchum v. Duncan, 96 U. S. 659;
Carter v.
Burr, 113 U.S.
Page 139 U. S. 376
737;
Wood v. Guarantee Trust Co., 128 U.
S. 416;
Queen v. Ashwell, 16 Q.B.D. 224. These
views are reinforced, if they need reinforcement, by the fact that
the real question of payment or no payment lies between the city in
its ordinary municipal capacity, on the one hand, and the city in
its extraordinary capacity as statutory trustee, on the other.
Payment is a contract implying both proposal and acceptance, and
under such conditions, could the city have made such a contract
without a clear statutory authority? We think not. If the
legislature had designed to authorize the city to extinguish its
own liability in this manner, it would have said so.
The remaining point to be noticed is that of the equitable
set-off. The argument of the appellee on this line is as follows:
the act of 1872 was only an enabling act to terminate the power of
the municipality to issue bonds of the same tenor as the warrants
which were taken up -- that is to say, payable out of the drainage
fund, if that should suffice. The case, as here regarded, then, is
clearly that of a trustee who has by error issued securities for
the advantage of the
cestui que trust. Having so issued
the securities, it must result inevitably that the city is to be
credited with the amount to the extent of which she has relieved
the fund.
It is obvious that the entire force of this argument rests on
the proposition that the drainage bonds were to be issued payable
only out of the drainage fund, and did not import, as contemplated
by the statute, any direct liability on the city; also that there
was no error in the act of issuing the bonds. We have already, in
the preceding passage, analyzed the statute and shown that,
according to our view, a direct liability on the city was exactly
what was intended, the provision as to the drainage fund in
connection with those bonds being merely a cumulative provision for
them. That view, of course, disposes of this argument, since it
denies the major premise.
Outside of the statute, we will mention one or two facts
confirmatory of the view that it was not the intention to have the
drainage bonds paid from the assessments: first, assessments in
1872 were less by or about $200,000 than the known sum needed to
complete the system devised by the act of
Page 139 U. S. 377
1871; secondly, although the assessments were collected while
the bonds were issued, so slowly and meagerly, as we have seen,
that fact, overwhelming if they were to constitute the only
resource for payment, seemed not to have the slightest effect on
either the city or the contractor in this matter; and finally, the
fact that the bonds were made payable fifty years after date seems
of itself a sufficient contradiction of the idea that the only
source for payment at that late date was these assessments.
We are therefore of the opinion that the court below erred in
dismissing the bill. We think an account should have been stated on
the basis indicated herein in its general outlines. The city was
trustee by statute, and can be called to account by any person in
interest. Exactly how the decree, when rendered, and the
ascertainment of liability thereby made should have been enforced,
it is hardly worthwhile to discuss in a dissenting opinion. The
usual remedy is by mandamus where a public body cannot be subjected
to ordinary process. That is a matter of detail only. The fact that
the public property could not be sold on execution is no reason for
absolving the city altogether from liability. The city should at
least have paid what it itself owed on the assessments in
question.
Upon these grounds, we feel constrained to withhold our assent
from the opinion and judgment of the Court.
FULLER, C.J., and HARLAN and LAMAR, JJ., dissent from the
judgment for the reasons stated in their dissenting opinion in
Peake v. New Orleans.
BROWN, J., did not hear the arguments in this case, and takes no
part in the decision.