The decree heretofore entered upon the mandate of this Court,
175 U. S. 175 U.S.
120, permitted of no distinction being made between drainage
warrants issued for the purchase of the dredging plant of the
Mexican Gulf Ship Canal Company and such as were issued in the
purchase of the franchises and in settlement of the claim for
damages urged by the Canal Company and Van Norden against the City
of New Orleans.
There was no error in permitting all parties holding drainage
warrants of the same class to come in and prove their claims
without formal intervention or special leave, though the validity
of such warrants in the hands of their holders might be examined
except so far as such validity had been already settled by the
decree.
Warrants to the amount of twenty thousand dollars issued for
drainage funds collected by the city and misapplied and
appropriated to the general funds of the city were also properly
allowed.
This was a writ of certiorari to review a decree of the court of
appeals, rendered May 1, 1900, affirming a decree of the Circuit
Court for the Eastern District of Louisiana, rendered March 26,
1900, which overruled certain exceptions of the defendant, the City
of New Orleans, to a master's report upon the amounts due under a
decree rendered by the court of appeals May 7, 1898, and affirmed
by this Court January 15, 1900.
175 U. S. 175 U.S.
120.
The decree of the circuit court of appeals, affirmed by this
Court, contained the following paragraphs:
1. That the City of New Orleans was indebted to John G.
Page 180 U. S. 200
Warner in the sum of $6,000, with interest, and that he was
entitled to be paid such sum out of the drainage assessments set
forth in the bill.
2. That such drainage assessments constituted a trust fund in
the hands of the city for the purpose of paying the claims of the
complainant and holders of the same class of warrants issued under
the act of sale from Warner Van Norden, transferee, to said city
under authority of Act No. 16 of the Legislature of Louisiana,
approved February 24, 1876.
3. That it be referred to a master to take and state an account
of all said drainage assessments, that warrant holders be entitled
to establish their claims before the master without formal
interventions or special leave of the court, and that, upon the
coming in of his report, complainant and other claimants would be
entitled to an absolute decree for the amounts due them if the fund
established by the accounting be sufficient, but if not sufficient
to pay such claims in full, then for the proper
pro rata
thereof, etc. The other provisions of the decree are
immaterial.
Upon this reference, warrants to the amount of $316,000, of a
total of $320,000 ($4,000 having been paid), were presented by
different parties, including Warner, and the master found: (1) that
all these warrants were
"issued to Warner Van Norden, transferee of the Mexican Gulf
Ship Canal Company by the defendant, the City of New Orleans in
payment of the consideration of the agreement and contract of sale
between himself and said city, by act [of sale]. . . dated June 7,
1876, as in said act specified, pursuant to the authority of the
act of the Legislature of Louisiana No. 16, dated February 24,
1876, as set forth in the complainant's bill, etc.; . . . that each
of said warrants was indorsed in blank by Warner Van Norden,
transferee, to whose order they were made payable, and delivered to
said claimants, or other parties through whom they have acquired
title, and that the said Van Norden has since . . . formally
transferred to the complainant, and to all holders of warrants who
might intervene in this cause, any and all interest he ever had in
said warrants, and subrogated them to all his rights of actions and
remedies against the defendant appertaining to the same. "
Page 180 U. S. 201
Exceptions were filed to this report upon the ground: (1) that
the advantages of the decree extended only to such warrants as were
issued in payment of the property purchased by the act of sale,
which said property, as shown by the inventory and appraisement of
T. S. Hardee, City Surveyor, amounted to $153,750;
"that the balance of drainage warrants issued under said act
were not in payment of the price of the property thereby sold, and
hence were not purchase warrants in the sense of the opinions and
decrees of the circuit court of appeals and of the supreme court
herein; that such balance of said warrants was issued in settlement
of a claim for damages urged by the Mississippi & Mexican Gulf
Ship Canal Company and Warner Van Norden against the City of New
Orleans;"
(2)
"that of said warrants the sum of $20,000 were issued, as will
appear by the express terms of the act, in payment of work which
had been done by said Van Norden -- that is, digging canals and
building levees which, at the time of the passage of said act, had
not been surveyed or measured by the city surveyor, and hence that
as to these warrants there could be no recovery or allowance
made."
In a supplemental report upon these exceptions, the master found
that the city issued warrants Nos. 313 to 392 inclusive, in
discharge of the consideration of the agreement of sale passed
before Le Gardeur, notary public, amounting to $300,000, and also
issued warrants Nos. 393 to 402 inclusive, aggregating $20,000, not
for work, but as a compromise for drainage taxes collected and
misappropriated, as stated in the said act of sale.
MR. JUSTICE BROWN delivered the opinion of the Court.
Page 180 U. S. 202
1. The second assignment of error filed in the circuit court,
adopting the substance of the exceptions to the master's report,
raises a distinction between the drainage warrants issued for the
purchase of the dredge boats, derricks, and other tangible property
of the ship canal company, appraised at $153,750, and such as were
issued in the purchase of the franchise and in settlement of the
claim for damages urged by the canal company and Van Norden against
the City of New Orleans. No such distinction, however, appears in
the decree of the circuit court of appeals, affirmed by this Court
in
175 U. S. 175 U.S.
120, which declared that the drainage assessments set forth in the
bill should constitute a trust fund in the hands of the city for
the purpose of paying the claims of complainant
and other
holders of the same class of warrants issued under the act of
sale from Van Norden to the city, and referred the case to a master
to state an account of all the drainage assessments, before whom
all warrant holders were to be notified to appear and establish
their claims, without being required to file intervention or to
obtain special leave of the court. Pursuant to this notice, the
warrant holders did appear and presented their warrants, which were
allowed. The decree did not permit of any distinction being made,
and none was made, between warrants issued for the purchase of the
property and such as were issued in purchase of the franchise or in
settlement of damages, and it is difficult to see in what respect
the master or the court departed from the decree of this Court.
As the bill was brought by Warner on his own behalf, as well as
on behalf of all other parties holding obligations of the same
nature and kind, there was no error in permitting all such parties
to come in and prove their claims without formal interventions or
special leave. All the warrants allowed belonged to the same class
as Warner's, and were issued upon the same consideration. This is
the method commonly resorted to in bills for the foreclosure of
railway mortgages or other securities under which bonds have been
issued and are widely scattered in the hands of holders, many of
whom are unknown and impossible to ascertain except by
advertisement. In cases of this character, decrees are treated as
decrees in favor of all in like
Page 180 U. S. 203
situation as the plaintiff, who come in and claim the benefit of
them.
Richmond v. Irons, 121 U. S. 27;
Brooks v. Gibbons, 4 Paige 374;
Thompson v.
Brown, 4 Johns.Ch. 619;
Hammond v. Hammond, 2
Bland.Ch. 362.
Doubtless the validity of these claims in the hands of holders
may be examined, except so far as such validity has been already
settled by the decree; but where the master, upon the reference,
has followed the decree and enforced its directions, no objection
can be taken upon appeal as to what he had done when the appeal
arises upon exceptions to his report.
New
Orleans v. Gaines, 15 Wall. 624. The master was
powerless to entertain any objection to the decree or any proposal
for its modification. His duty was simply to carry it out according
to its terms.
It should be stated in this connection that no such distinction
between the different classes of warrants as is now made was called
to the attention of this Court when the case was here upon question
certified,
167 U. S. 167 U.S.
467, or upon the merits,
175 U. S. 175
U.S. 120. In fact, the present exceptions to the master's report
obviously involve an attempt to set up a new defense as to a part
of these warrants after the merits of the case have been fully
considered and disposed of. This is impossible.
Yazoo &c.
R. Co. v. Adams, ante, 180 U. S. 1;
Supervisors v. Kennicott, 94 U. S.
498.
But considering the question to be still an open one, and that
we are at liberty to inquire whether the court exceeded its
authority in decreeing the payment of these warrants without
reference to whether they were given for the purchase of the
property or franchises or the settlement of damages, the result
would not be different. It was evident there had been a claim for
damages pending a long time against the city. By the Act of
February 24, 1871 "to provide for the drainage of New Orleans," the
former boards of drainage commissioners were abolished and their
assets transferred to a board of administrators who were
"subrogated to all to rights, powers, and facilities" possessed by
the commissioners. The ship canal company was authorized to
undertake the work of draining the city, and by section 6 it was
made the duty of the board of
Page 180 U. S. 204
administrators
"to locate the lines of the canals and protection levees
specified in the various sections of this act in time to prevent
delay in the prosecution of the work of the said company. . . . And
should the city council fail to locate the lines of said canal and
protection levees above specified, the City of New Orleans is
hereby made liable to the said company for the damages resulting
from such delay."
By the Act of February 24, 1876, authorizing the city to control
its own drainage and to purchase the property of the ship canal
company, the common council was empowered "to transact and
contract" with the ship canal company and its transferee
"for the purchase and settlement of all or any rights,
franchises, and privileges created, authorized, or arising in favor
of said company or said transferee under and by virtue of act No.
30 of Acts of 1871; also, for the purchase and transfer to the City
of New Orleans of all tools, implements, machines, boats, and
apparatus belonging to said company or its transferee,"
etc. It will be observed that the city is invested with a double
power: first to transact and contract for the purchase and
settlement of any rights, franchises, privileges, etc., and the
other for the purchase and transfer of the dredging plant. The word
"transact," which seems ambiguous here, is explained by article No.
3071 of the Civil Code of Louisiana, which defines "a transaction
or compromise" to be
"an agreement between two or more persons, who, for the purpose
of preventing or putting an end to a lawsuit, adjust their
differences by mutual consent."
By the second clause of the section, the purchase and transfer
of the dredging plant was authorized.
Pursuant to this act, the city surveyor was authorized by
ordinance of April 26, 1876, to examine the condition and value of
the dredging plant, making a report to the committee of the whole,
"together with a statement of all information in the possession of
his office concerning damages claimed by said . . . canal company,
or transferee thereof." In compliance with this ordinance, he
appraised the value of the dredging plant at $153,750, and stated
that the damages claimed by the transferee were for delays at
various times and places, and further stated that he was unable to
arrive at a conclusion as to their amount, and
Page 180 U. S. 205
did not feel called upon to express an opinion, but that he had
no doubt the committee, from the facts stated, would be able to
arrive at a just and satisfactory conclusion. This left the common
council free to settle for the damages without an appraisement.
Under these circumstances, the failure to appraise the damages
would not vitiate their settlement.
By a further ordinance, adopted May 26, 1876, the mayor was
authorized to enter into an agreement with the canal company for
the purchase of its plant, and
"also for the full settlement of all claims for damages, and to
secure the absolute sale, relinquishment, and transfer to the City
of New Orleans of all rights, privileges, and franchises,"
etc., and upon the execution of the agreement to draw upon the
administrator of finance for the sum of $300,000 in drainage
warrants, in full settlement, as above provided.
Conceding that the power given by the act of 1876 to transact
and contract with the canal company for the purchase and settlement
of all or any rights, franchises, and privileges is somewhat
ambiguous as the source of a power to compromise for damages, the
practical construction put upon that act by the ordinances of April
26 and May 26, 1876, as including claims for damages is entitled to
great weight, particularly in view of the long subsequent
acquiescence of the city in that construction.
By the act of sale executed June 7, 1876, the canal company
transferred its dredging plant to the city, as well as its
franchises, privileges, contracts, and advantages, and subrogated
the city to all its rights, actions, and remedies, in consideration
of the sum of $300,000, and the president and secretary of the
canal company, and Van Norden, their transferee, also agreed that
the above amount should be in full settlement of "all existing
claims for damages" which either of them "ever had, or have now, or
may have, against the said City of New Orleans."
It is difficult to see how the intention of the city to settle
all these claims could be made clearer, or the terms of the actual
settlement more sweeping, than they were by these proceedings. What
the items of damages were does not appear.
Page 180 U. S. 206
As to what influences were brought to bear upon the common
council to induce it to pay so large a sum as $146,250 for these
damages, we are equally in the dark. Certainly we are not at
liberty to impute corrupt motives to the council. The arrangement
may have been an unfortunate one, but the arrangement as made is
beyond doubt.
It is obviously impossible to distinguish as between these
warrants, and to say that such were issued in payment of the plant,
and such others for the purchase of franchises and in settlement of
the damages. Granting the position taken by the city to be correct,
it would result that all the warrants must be scaled down
pro
rata in the proportion of about fifty percent, which would
obviously be unfair to those who received purchase warrants, or
there must be some attempt to classify these warrants. But, as the
warrants were all alike in form, no such classification is
possible. It is suggested by the city that it must be considered
that the warrants were issued and applied in the numerical order of
their execution: first for the payment of the price of the property
purchased; next for the claim for the settlement of damages, and
lastly for the payment of work mentioned in the said notarial act.
But this would result in the rejection of the Warner warrants,
which were expressly allowed by the decree of this Court to the
amount of $6,000, since it appears by the report of the master that
the warrants issued to Warner and allowed by such decree were Nos.
379, 380, and 381, and did not fall among the first $153,750
issued, but were payable long after this amount, appraised as the
value of the plant, had been exhausted. It would also result in the
disallowance of certain warrants to Wilder & Company, upon
which a judgment at law was recovered on May 24, 1898, after the
case had been remanded from the circuit court of appeals. Obviously
the position of the city in respect to these warrants is
untenable.
2. The only other item to which exception is taken is one of
$20,000, for which warrants Nos. 392 to 402, inclusive, were issued
as a compromise of drainage taxes collected by the city and
misappropriated. These were in excess of the $300,000 allowed in
payment of the plant and various claims of the canal
Page 180 U. S. 207
company, and were especially provided for in the act of sale as
follows:
"That, inasmuch as it has been claimed that certain collections
of drainage funds have been applied by the previous administrators
to general fund purposes, the said City of New Orleans will issue
to the said W. Van Norden the sum of $20,000 in drainage warrants
in full satisfaction of the same."
The authority to include this in the act of sale is questioned
by the city, but we think it comes within the first section of the
act of 1876, which provides for "the purchase and settlement of all
or any rights . . . arising in favor of said ship canal company or
said transferee" under the act of 1871 and within the ordinance of
May 26, to which allusion has already been made, which provides
for
"the full settlement of all claims for damages and to secure the
absolute sale, relinquishment, and transfer to the City of New
Orleans of all rights . . . arising in favor of the canal
company."
Money collected by the city, applicable to the drainage funds
and appropriated to the general funds of the city, manifestly
creates a right in favor of the canal company to a restoration of
the amount. If there were doubt of the proper construction of these
words, the long acquiescence of the city and the failure to raise
an objection to this claim until after final decree is sufficient
to put the matter at rest.
The decree of the circuit court of appeals is
Affirmed.
MR. JUSTICE WHITE and MR. JUSTICE PECKHAM took no part in this
case.
