This Court has not jurisdiction to review the judgment of a
state court based on the contract clause of the Constitution unless
the alleged impairment was by subsequent legislation which has been
upheld or given effect by the judgment sought to be reviewed.
Bacon v. Texas, 163 U. S. 207.
A power to tax to fulfill contract obligations continues until
the obligation is discharged.
The power of taxation conferred by law enters into the
obligation of a contract, and subsequent legislation withdrawing or
lessening such power and which leaves the creditors without
adequate means of satisfaction impairs the obligation of their
contracts.
Where a municipality has power to contract and tax to meet the
obligation, the proper remedy of the creditor is by mandamus to the
authorities of the municipality either to pay over taxes already
collected for their debt or to levy and collect therefor.
Page 215 U. S. 171
The legislature of a state cannot take away rights created by
former legislation for the security of debts owing by a
municipality of the state or postpone indefinitely the payment of
lawful claims until such time as the municipality is ready to pay
them.
Act of November 5 of 1870 of State of Louisiana providing for
registration and collection of judgments against the City of New
Orleans, so far as it delays the payment, or collection of taxes
for the payment, of contract claims existing before the passage of
the act is void as impairing the obligation of contracts within the
meaning of the federal Constitution.
119 La. 623 reversed.
The facts are stated in the opinion.
MR. JUSTICE DAY delivered the opinion of the Court.
This case presents the question of the right of the relator, as
receiver of the Board of Metropolitan Police of the Metropolitan
Police District, consisting of the Parishes of Orleans, Jefferson,
and St. Bernard, and including the City of New Orleans, in the
State of Louisiana, to compel an assessment, by mandamus, of taxes
to pay a certain judgment recovered by the relator in his capacity
as receiver against the City of New Orleans, in the sum of
$123,475.57, with interest from April 4, 1904.
On September 14, 1868, the General Assembly of the State of
Louisiana passed an act establishing a metropolitan police
district, constituting the same of the Parishes of Orleans,
Jefferson, and St. Bernard (including the City of New Orleans).
Section 29 of that act provides:
"SEC. 29. Be it further enacted, etc., that the Common Councils
of the Cities of New Orleans, Jefferson City, and Carrollton, and
the Police Juries of the Towns of Algiers and Gretna, and of the
Parishes of Orleans, Jefferson, and St.
Page 215 U. S. 172
Bernard, are hereby respectively empowered and directed annually
to order and caused to be raised and collected by the tax upon the
estates, real and personal, subject to taxation according to law,
within the said cities and towns, the sums of money as aforesaid,
annually estimated and apportioned as the share of such cities or
parishes of the said total expenses of the Metropolitan Police
District."
This act was supplemented by various statutes, and its
provisions were in force until March 31, 1877, when it and various
other acts relating to the Metropolitan Police District were
repealed, and the City of New Orleans was authorized and empowered,
through the mayor and board of administrators, to establish,
organize, and maintain a proper and sufficient police force.
On January 22, 1900, Louis A. Hubert was duly qualified as
receiver of the Board of Metropolitan Police. On April 6, 1904,
Hubert, as such receiver, began an action in the Civil District
Court of the Parish of Orleans, in which he averred that the city
was indebted to him, as such receiver, in the sum of $411,884.89,
with interest from April 3, 1880, and averred that, for various
years, from 1869 to 1877, inclusive, the City of New Orleans had
received and collected taxes for the maintenance of the Board of
Metropolitan Police and the payment of its expenses, which amounts,
although collected by the city, were never paid over to the Board
of Metropolitan Police or its representatives. The petition averred
that the Board of Metropolitan Police owed large amounts of money;
that the whole of the indebtedness thus due from the city was
necessary to pay the same. Upon issue made and trial had, a
judgment was rendered in favor of the receiver on May 18, 1905. The
record of this judgment was made part of the record herein, and it
appears therein that the Civil District Court took an account of
the taxes collected for the years 1869 to 1877, inclusive, and not
paid over for account of the Board of Metropolitan Police, and
found the same to be the sum of $136,082.62, for which judgment was
rendered
Page 215 U. S. 173
against the City of New Orleans. This judgment was modified by
the Supreme Court of Louisiana on March 12, 1906, and affirmed
after deducting the sum of $12,607.05, leaving a judgment in force
for $123,475.57, with interest. 116 La. 507.
On April 23, 1906, a petition for mandamus was filed in the
present case in the civil District Court for the Parish of Orleans.
In that case, the relator set up the recovery of the judgment in
the state court; that, under Act No. 5 of 1870 (to be noticed
hereafter), no writ of
fieri facias could be issued; that
the city had no money or property liable to seizure, if such a writ
could be issued; that the judgment had been registered under said
act in the office of the city comptroller on March 26, 1906; that
the basis upon which the said judgment was rendered was a
contractual and statutory obligation imposed upon the City of New
Orleans to levy, collect, and pay to the Board of Metropolitan
Police the sums apportioned to it under the act of 1868, creating
the board, and the acts amendatory thereto. The petition averred
that the maximum rate of taxation for the years 1869-1877,
inclusive, had not been levied, and prayed a writ of mandamus
requiring the City of New Orleans, through its mayor and council,
to levy and pay over to the relator, as receiver, a tax of 1 mill
on property within the City of New Orleans, or so much thereof as
might be necessary to satisfy the judgment. The city appeared and
answered, and claimed the benefit of Act No. 5 of the extra session
of 1870, and that, under § 29 of the act of 1868, above set forth,
the city had levied the tax apportioned to the Board of
Metropolitan Police, and that the city's power of taxation in the
premises had been fully exercised and exhausted.
On November 12, 1906, the Civil District Court rendered a
judgment dismissing the relator's petition for mandamus. Upon
appeal, the Supreme Court of Louisiana affirmed this judgment. 119
La. 624. The present writ of error brings this judgment here for
review.
Page 215 U. S. 174
In the opinion of the Supreme Court of Louisiana, it appears
that the basis of the judgment upon which the relator sued was held
not to be contractual in its nature, and, further, that the state,
having abolished the Metropolitan Police Board, the only standing
of the relator for the purposes of this suit was as the
representative of third persons who may have made contracts with
the board which were dependent upon taxes receivable from the city
for their fulfillment. The learned court then pointed out an
apparent inconsistency between the petition for mandamus in this
case and the petition on which the original judgment was awarded,
and said:
"In the brief presented on behalf of relator, for the purposes
of the present application, his counsel say:"
"This is not a proceeding to compel the City of New Orleans to
levy a special police tax; the city has actually levied and
collected the tax. The tax levy, having been made, in compliance
with the statute, and having been collected by the city, gave rise
to a cause of action in favor of the receiver to enforce its
payment to the Board of Metropolitan Police. This cause of action
therefore could not have arisen until the city had levied and
collected the tax and refused to pay over the proceeds."
"Assuming that the position that the relator now wishes to
occupy is correctly stated in the foregoing excerpt, we take it to
be conceded that the city has levied and collected all the taxes
authorized or required by the metropolitan police legislation; and,
further, assuming that the relator represents the holders of the
indebtedness (of the police board) referred to in the petition upon
which he obtained his judgment (though it is not so alleged in the
application now being considered), the question still remains, does
he disclose and make out a case which entitles him to a writ of
mandamus to compel the city to levy and collect an additional tax
in order to make good its failure to pay over the tax already
levied and collected?"
The court therefore treated the petition for mandamus
Page 215 U. S. 175
as one based upon a judgment to recover taxes which the city had
collected and not paid over. Considering the case in this aspect,
the learned court held that the power to levy taxes for the various
years for Metropolitan Police District purposes had been exhausted,
and that there was no power to relevy such tax, and further that,
as to liabilities incurred after the passage of Act No. 5 of 1870,
that act was a defense to the action, and the court reached the
conclusion that the application for mandamus must fail, as it was
an attempt to require the city to exert powers of taxation already
exhausted, and which no longer existed.
In order to review in this Court the judgment of a state court
because of the provision of the federal Constitution against state
legislation impairing the obligation of a contract, the impairment
must be by some subsequent legislation of the state which has been
upheld or given effect in the judgment of the state court sought to
be reviewed.
Bacon v. Texas, 163 U.
S. 207. While this is true, this Court is not limited to
the consideration of the mere language of the opinion, but will
examine the substance and effect of the decision.
McCullough v.
Virginia, 172 U. S. 102,
172 U. S.
116.
It appears from the documents attached to and made part of the
record that the indebtedness represented by the receiver in this
case was for outstanding debts of the Metropolitan Police Board in
the years 1869-1877, inclusive, a considerable part of it being for
salaries of policemen, and the Supreme Court of Louisiana has held
that the taxes of several years, from 1869 to 1876, inclusive,
constitute one fund out of which the warrants of the defunct
Metropolitan Police Board are payable.
Brittin v. The City of
New Orleans, 106 La. 469.
A number of decisions in this Court have settled the law to be
that, where a municipal corporation is authorized to contract, and
to exercise the power of local taxation to meet its contractual
engagements, this power must continue until the contracts are
satisfied, and that it is an impairment of an
Page 215 U. S. 176
obligation of the contract to destroy or lessen the means by
which it can be enforced. In the case of
Wolff v. New
Orleans, 103 U. S. 358, the
subject was given full consideration, and the doctrine thus
summarized by Mr. Justice Field speaking for the court (p.
103 U. S.
365):
"It is true that the power of taxation belongs exclusively to
the legislative department, and that the legislature may at any
time restrict or revoke, at its pleasure, any of the powers of a
municipal corporation, including, among others, that of taxation,
subject, however, to this qualification, which attends all state
legislation, that its action in that respect shall not conflict
with the prohibitions of the Constitution of the United States,
and, among other things, shall not operate directly upon contracts
of the corporation so as to impair their obligation by abrogating
or lessening the means of their enforcement. Legislation producing
this latter result not indirectly, as a consequence of legitimate
measures taken, as will sometimes happen, but directly, by
operating upon those means, is prohibited by the Constitution and
must be disregarded -- treated as if never enacted -- by all courts
recognizing the Constitution as the paramount law of the land. This
doctrine has been repeatedly asserted by this Court when attempts
have been made to limit the power of taxation of a municipal body
upon the faith of which contracts have been made and by means of
which alone they could be performed. . . . The prohibition of the
Constitution against the passage of laws impairing the obligation
of contracts applies to the contracts of the state, and to those of
its agents acting under its authority, as well as to contracts
between individuals. And that obligation is impaired, in the sense
of the Constitution, when the means by which a contract, at the
time of its execution, could be enforced -- that is, by which the
parties could be
obliged to perform it, are rendered less
efficacious by legislation operating directly upon those
means."
In
Ralls County Court v. United States, 105 U.
S. 733, it was
Page 215 U. S. 177
held that, after a debt was created upon certain bonds, laws
passed depriving the county court of the power to levy the tax
which it possessed when the bonds were issued were invalid. In that
case, the suit was brought upon certain coupons, and it was held
that the coupons were merged in the judgment, but nevertheless
carried with them into the judgment all the remedies which in law
formed a part of their contract obligation, and that those remedies
might still be enforced notwithstanding the changes in the form of
the debt.
In dealing with the feature important to be considered in this
case, the Court, speaking by Mr. Chief Justice Waite, said:
"It follows from this that all laws of the state which have been
passed since the bonds in question were issued, purporting to take
away from the county courts the power to levy taxes necessary to
meet the payments, are invalid, and that, under the well settled
rule of decision in this Court, the circuit court had authority by
mandamus to require the county court to do all the law, when the
bonds were issued, required it to do to raise the means to pay the
judgment, or something substantially equivalent. The fact that
money has once been raised by taxation to meet the payment, which
has been lost, is no defense to this suit. The claim of the
bondholders continues until payment is actually made to them. If
the funds are lost after collection, and before they are paid over,
the loss falls on the county, and not the creditors. The writ as
issued was properly in the alternative to pay from the money
already raised, or levy a tax to raise more. It will be time enough
to consider whether the command of the writ that the court
cause the tax to be collected in an excess of the
requirements of the law when the justices of the court are called
on to show why they have not obeyed the order."
We think the doctrine of the
Ralls County case, when
applied to the facts in the case at bar, is decisive of this
feature of it. The city levied and afterwards collected taxes for
the benefit of the Metropolitan Police Board. The Police Board
Page 215 U. S. 178
had issued its outstanding warrants for salaries, etc., upon the
faith of the exercise of the taxing power for their payment. The
contract creditors of the Police Board were entitled to rely upon
the benefit of the laws imposing taxation to make their obligations
effectual. They could not constitutionally be deprived of such
benefit. While it is true that the Police Board made the contracts,
the only means of keeping them was through the exercise of the
power of taxation conferred by law upon the city. The city exerted
its power, as required by law, levied and collected the taxes, but
applied them to other purposes, and has failed to turn them over
upon demand. We think the power to levy these taxes still exists.
As to the creditor, deprived thereof by the action of the city, it
is as though such power had never been exercised. The city still
has the power to levy these taxes for the benefit of the persons
for whom they were intended, and who had a contract right to the
exertion of the remedies for the satisfaction of their claims by
the levy and collection of taxes existing when their debts accrued,
which right could not be taken away from them by subsequent
legislation. The power of taxation conferred by law entered into
the obligation of the contracts, and any subsequent legislation
withdrawing or lessening such power, leaving the creditors without
adequate means of satisfaction, impaired the obligation of their
contracts within the meaning of the Constitution.
Memphis v.
United States, 97 U. S. 293;
Von Hoffman v. City of
Quincy, 4 Wall. 535;
Seibert v. Lewis,
122 U. S. 284;
Mobile v. Watson, 116 U. S. 289;
Scotland County Court v. United States, 140 U. S.
41.
We come now to the question can Act No. 5 of 1870 be
constitutionally applied so as to preclude the remedy sought in
behalf of the receiver in this case? This act has been at least
twice before this Court. In the case of
Louisiana v. New
Orleans, 102 U. S. 203,
102 U. S. 205,
the provisions of the act were summarized by Mr. Justice Field,
speaking for the Court, as follows:
"That act divests the courts of the state of authority to
Page 215 U. S. 179
allow any summary process or mandamus against the officers of
the City of New Orleans to compel the issue and delivery of any
order or warrant for the payment of money, or to enforce the
payment of money claimed to be due from it to any person or
corporation, and requires proceedings for the recovery of money
claimed to be owing by the city to be conducted in the ordinary
form of action against the corporation, and not against any
department, branch, or officer thereof. The act also provides that
no writ of execution or
fieri facias shall issue against
the city, but that a final judgment against it, which has become
executory, shall have the effect of fixing the amount of the
plaintiff's demand, and that he may cause a certified copy of it,
with his petition and the defendant's answer and the clerk's
certificate that it has become executory, to be filed in the office
of the comptroller, and that thereupon it shall be the duty of the
comptroller or auditing officer to cause the same to be registered,
and to issue a warrant upon the treasurer or disbursing officer of
the corporation for the amount due thereon, without any specific
appropriation therefor, provided there be sufficient money in the
treasury specially designated and set apart for that purpose in the
annual budget or detailed statement of items of liability and
expenditure, pursuant to the existing or a subsequent law."
"The act further provides that, in case the amount of money
designated in the annual budget for the payment of judgments
against the City of New Orleans shall have been exhausted, the
common council shall have power, if they deem it proper, to
appropriate from the money set apart in the budget or annual
estimate for contingent expenses, a sufficient sum to pay the same;
but, if no such appropriation be made, then that all judgments
shall be paid in the order in which they shall be filed and
registered in the office of the comptroller of the city from the
first money next annually set apart for that purpose."
In that case, it was held that, insofar as the act requires
registration of a judgment, it did not impair existing remedies
Page 215 U. S. 180
for its collection, and must be complied with, Mr. Justice Field
saying (p.
102 U. S.
206):
"The obligation of a contract, in the constitutional sense, is
the means provided by law by which it can be enforced -- by which
the parties can be obliged to perform it. Whatever legislation
lessens the efficacy of these means impairs the obligation. If it
tend to postpone or retard the enforcement of the contract, the
obligation of the latter is, to that extent, weakened. The Latin
proverb,
qui cito dat bis dat -- he who gives quickly
gives twice -- has its counterpart in a maxim equally sound --
qui serius solvit, minus solvit -- he who pays too late
pays less. Any authorization of the postponement of payment, or of
means by which such postponement may be effected, is in conflict
with the constitutional inhibition. If, therefore, we could see
that such would be the effect of the provision of the act of the
state, No. 5 of 1870, requiring judgments to be registered with the
comptroller before they are paid, we should not hesitate to declare
the provision to be invalid. But we are not able to see anything in
the requirement which impedes the collection of the relator's
judgments, or prevents his resort to other remedies if their
payment be not obtained. The registry is a convenient means of
informing the city authorities of the extent of the judgments, and
that they have become executory, to the end that proper steps may
be taken for their payment. It does not impair existing
remedies."
The act was again before this Court in the case of
Wolff v.
New Orleans, 103 U. S. 358. In
that case, the act was fully analyzed and it was pointed out that
the payment of judgments thereunder was extremely uncertain, and
depended entirely upon the discretion of the council, after
providing for other municipal purposes and expenses, and was in
direct violation of powers of taxation which existed at the time
the debt sued for in that case was created, and could not be
constitutionally enforced as against such claim.
Applying the principles thus announced to the case at bar,
Page 215 U. S. 181
we think Act No. 5 of 1870, postponing indefinitely the payment
of relator's judgment, if given effect, would deprive the receiver,
as the representative of the interested creditors, of the benefit
of the right of taxation for the payment of their claims which
existed before the passage of the act of 1870. By § 29 of the Act
of September 14, 1868, above quoted, the Common Council of the City
of New Orleans and others were empowered and directed annually to
order and cause to be raised and collected by a tax upon the
estates, real and personal, subject to taxation within said city,
the sums of money annually estimated and apportioned as the share
of such city for the total expense of the Metropolitan Police
District. This act was followed by other supplementary and
amendatory acts to make the purposed more effectual, and was not
repealed until the Act of March 31, 1877, which abolished the
Metropolitan Police Board. This repeal could not take away the
right of the creditors of the Metropolitan Police Board to have
taxation for their benefit. Nor could the act of 1870
constitutionally take away the rights created by former legislation
for the security of their debts, and postpone indefinitely the
payment of their claims until such time as the city was ready and
willing to pay them.
We are of opinion that the writ of mandamus should have been
awarded in favor of the relator requiring the city to pay over the
taxes for which the judgment was rendered or to levy and collect a
tax therefor for the benefit of the relator as receiver. The
judgment of the Supreme Court of Louisiana is reversed, and the
cause remanded to that court for further proceedings not
inconsistent with this opinion.
Reversed.