Upon consideration of the legislation of Tennessee, being
chapter 10 of acts of 1879, entitled "An Act to repeal the charters
of certain municipal corporations, and to remand the territory and
inhabitants thereof to the government of the state," approved Jan.
30, 1879; chapter 11, entitled "A Bill to establish taxing
districts in this state, and to provide the means of local
government for the same," approved Jan. 30, 1879; and chapter 92,
entitled
"An Act to collect and dispose of the taxes assessed for
municipal corporations in this state whose charters have been or
may be repealed, or which may surrender their charters, and to
provide for the compromise and make settlement of the debts of such
distinct municipal corporations, respectively,"
approved March 14, 1879 (
infra, pp.
102 U. S. 477,
102 U. S. 479,
102 U. S.
490), the Court holds:
1. Property held by the City of Memphis for public uses, such as
public buildings, streets, squares, parks, promenades, wharves,
landing places, fire engines, hose and hose carriages, engine
houses, engineering instruments, and generally all things held for
governmental purposes, cannot be subjected to the payment of its
debts. Upon the repeal of its charter, such property passed under
the immediate control of the state, the power once delegated to the
city in that behalf having been withdrawn.
2. The private property of individuals within the limits of the
territory of the city cannot be subjected to the payment of the
debts of the city except through taxation.
3. The power of taxation is legislative, and cannot be exercised
otherwise than under the authority of the legislature.
4. Taxes levied according to law before the repeal of the
charter, other than such as were levied in obedience to the special
requirement of contracts entered into under the authority of law,
and such as were levied under judicial direction for the payment of
judgments recovered against the city, cannot be collected through
the instrumentality of a court of chancery at the instance of the
creditors of the city. Such taxes can only be collected under
Page 102 U. S. 473
authority from the legislature. If no such authority exists, the
remedy is
by appeal to the legislature, which alone can grant relief.
Whether taxes levied in obedience to contract obligations or under
judicial direction can be collected through a receiver appointed by
a court of chancery, if there be no public officer charged with
authority from the legislature to perform that duty, is not
decided, as the case does not require it.
5. The receiver and bank tax collector appointed under the
authority of the Act of March 13, 1819, is a public officer,
clothed with authority from the legislature for the collection of
the taxes levied before the repeal of the charter. The funds
collected by him from taxes levied under judicial direction cannot
be appropriated to any other uses than those for which they were
raised. He, as well as any other agent of the state charged with
the duty of their collection, can be compelled by appropriate
judicial orders to proceed with the collection of such taxes by
sale of property or by suit, or in any other way authorized by law,
and to apply the proceeds upon the judgments.
6. The bills in this case, not having been framed with a view to
any such purpose, cannot be amended so as to obtain relief against
such receiver and back tax collector.
On Feb. 28, 1879, Robert Garrett and others filed their bill in
the court below against the City of Memphis, Tennessee, setting
forth that they are the owners and holders of overdue and unpaid
bonds and coupons and other evidences of her indebtedness to the
amount of more than $100,000, upon much of which indebtedness they
have secured judgments and writs of mandamus to compel the
collection thereof, but that, owing to the malfeasance,
misfeasance, and incompetency of her officers charged with the
collection of taxes, a large proportion of those assessed and
levied for many years past, and amounting to at least $2,500,000,
are uncollected and unpaid, by reason of which she is insolvent;
that her persistent failure to collect them is a fraud upon her
creditors; that during each of the years 1875, 1876, 1877, and 1878
a large levy of taxes was made in obedience to writs of mandamus,
but that by reason of her failure during each of those years to
collect more than three-fifths of the amount thereof, and also of
the taxes assessed and levied for general purposes, a large amount
represented by the judgments remains unpaid; that the special
levies so made, in which the complainants have a large interest,
constitute a trust fund for the payment of their judgments which
can only be used for that purpose, and that the
Page 102 U. S. 474
city's neglect and failure to press the collection thereof is a
fraud upon them, against which a court of equity will relieve; that
outside of the power of a court to appoint a receiver to take
charge of the assets of the city and collect the taxes so levied,
it is, by an act of the Legislature of Tennessee passed March 19,
1877, entitled "An Act to enable municipal corporations having more
than thirty-five thousand inhabitants to settle their
indebtedness," being chapter 71 of the acts of 1877, provided that
upon the application of any person or persons who are the holders
of any past due and unpaid bonds, coupons, or other indebtedness,
not less in amount than $100,000, of any municipal corporation
having more than thirty-five thousand inhabitants, it shall be the
duty of the Court of Chancery to appoint a receiver for such
corporation; that the city's indebtedness, represented by judgments
and otherwise, amounts to over $850,000, and that her population
exceeds thirty-five thousand persons. They therefore pray that a
receiver be appointed to take charge of her assets, including her
tax books and bills for past due and imposed taxes, and that he be
clothed with the power conferred by said act of March 19, 1877, and
such other power as may be necessary to enable him to collect all
outstanding indebtedness and claims of every kind due to her, and
to settle her debts, particularly those due to the
complainants.
Chapter 71 of acts of 1877 enacts as follows:
"SEC. 2. That the power to levy taxes of every description, and
for any and every purpose whatever, is hereby taken away from said
municipal corporations, and each and every officer and
representative thereof, and said taxing power lodged in the
legislature of the state, and not elsewhere; and that by virtue of
article 11, section 9, of the constitution of the state, in
addition to the powers already conferred, the chancery court, for
the purpose of settling the indebtedness of Memphis and other
municipal corporations containing more than thirty-five thousand
inhabitants, may appoint a receiver, and exercise such other powers
as are hereinafter set forth."
"SEC. 3. That upon the application of any person or persons, who
are the holders and owners of any past due and unpaid bonds,
coupons, or other indebtedness of said municipal corporations,
not
Page 102 U. S. 475
less in amount than one hundred thousand dollars, it shall be
the duty of the chancery court to appoint a receiver for said
municipal corporations, who, as the officer of the court, and not
otherwise, shall, under the order and instruction of the court, act
for such municipal corporations."
"SEC. 4. That said receiver, together with two other citizens
and property holders of said corporation, to be appointed by the
court, shall constitute a commission to settle and compromise the
indebtedness of said municipal corporation, by funding the same, at
a rate not exceeding fifty-five cents in the dollar on judgments,
and not exceeding fifty cents in the dollar for bonds or coupons
past due, and at a less rate for the less valuable class of said
indebtedness; and upon their action being confirmed by the court,
the court shall direct the receiver to execute the necessary and
proper compromise bonds and contracts, which bonds, when so
executed, shall to all intents and purposes be the valid and
binding obligations of said corporation; but it is understood and
agreed that the holders of any of the bonds issued by the receiver
as provided in this act shall have the option, after two years, to
fund or exchange them at par, into bonds payable thirty years after
the date of their issue, and bearing interest at the rate of six
percent per annum; said bonds shall be of the denomination of one
thousand dollars each, and numbered consecutively from one to
twenty five hundred; the total amount of bonds issued under this
act shall not exceed two and one half millions of dollars."
"SEC. 5. That in order to enable said commission to make a
settlement of said municipal indebtedness, as contemplated, it is
hereby enacted:"
"1. That all bonds and matured coupons and judgments, and all
paving scrip certificates issued by said corporation, and all
receipts for money paid by taxpayers to paving contractors for
making Nicholson and stone pavement, &c., by virtue of any
contracts with said corporation, may be funded at such a rate not
exceeding the maximum above mentioned, and into such bonds, bearing
not exceeding six percent per annum interest, as may be agreed on
between the parties, the holder, and said commission."
"2. That all matured bonds and coupons, issued by virtue of any
agreement made in pursuance of this act, shall be receivable for
taxes, city dues, and indebtedness of every kind."
"3. That said municipal corporations are hereby prohibited from
issuing scrip at any time, or bonds, while any bonds issued
under
Page 102 U. S. 476
this act are outstanding, except such as may be issued in
exchange, as hereinbefore provided in section 4 of this act."
"4. That, hereafter, for said municipal corporations, there
shall not be levied a higher rate of taxation for general purposes,
as defined in the charter, than one percent for the next five
years, and at no time thereafter for said purposes a tax exceeding
one dollar and twenty five cents on the hundred dollars."
"5. That an ample interest and sinking fund tax shall be levied
annually, and collected, to meet the maturing interest and retire
and pay the bonds issued under this act, and that this tax shall be
faithfully applied to the object proposed. The sinking fund tax
shall be paid into the hands of three sinking fund commissioners,
and the interest tax shall be paid into the hands of three interest
commissioners; each and all of said sinking fund and interest
commissioners shall be appointed by the court, and shall be
citizens of established integrity and responsibility, who shall
give bond in sufficient amounts to cover the funds coming into
their hands and take an oath to faithfully execute their trusts;
said bonds to be fixed by the court."
"6. That the provisions of this act may be made a part of the
contract with the holders of any bond or coupon issued by reason of
any agreement made under this act."
"7. That so much of secs. 38, 63, 64, and 66 of an act passed
March 20, 1875, and all other acts as are in conflict with the
provisions of this act, are hereby expressly repealed."
"SEC. 6. That the court shall appoint the interest and sinking
fund commissioners, and supply all official vacancies as they may
occur in the different municipal departments, which, as to the
ordinances affecting the same and in every other respect, remain
unaffected, except in so far as they may conflict with the
enforcement of the provisions of this act, in which event the court
will so order as to carry out the true intent and purposes of this
act:
provided, however, that all the offices not abolished
by this act be filled by a popular vote, for the term of two years,
at the time designated in the charter for the next regular
municipal election."
"SEC. 7. That to carry into effect the true intent and
provisions of this act, the legislature of the state hereby levies
an annual tax of one dollar and sixty cents on each one hundred
dollars' worth of taxable property and values within said municipal
corporation (including the school tax, which shall not exceed ten
cents), to be applied under the order and directions of the court
in the payment of current expenses, interest on compromise
bonds,
Page 102 U. S. 477
and the extinguishment of the indebtedness of said municipal
corporations."
"SEC. 8. That this act shall take effect, and not before, when
the sum of the tax mandamuses outstanding against any one of said
municipal corporations shall amount in the aggregate to the sum of
($850,000) eight hundred and fifty thousand dollars."
"Passed March 19, 1877. Approved March 23, 1877."
On the day next after that upon which the complainants' bill was
filed, the Legislature of Tennessee passed the following acts:
"
CHAPTER 10, OF ACTS OF 1879"
"
An Act to repeal the Charters of certain Municipal
Corporations, and to remand the Territory and Inhabitants thereof
to the Government of the State."
"SEC. 1. Be it enacted by the General Assembly of the State of
Tennessee, that an Act passed Dec. 1, 1869, entitled 'An Act to
reduce the charter of the City of Memphis and the several acts
amendatory thereof into one act,' being chapter 26 of the private
acts of 1869 and 1870, also chapter 47, to the public acts of 1873,
entitled 'An Act to amend the charters of all incorporated towns
and cities in the state,' passed March 18, 1873; also, an act
entitled 'An Act to incorporate the town of Memphis,' passed Dec.
9, 1826; also, an act entitled 'An Act to extend the limits of the
corporation of the town of Memphis, and for other purposes,' passed
Oct. 19, 1832; also, an act entitled 'An Act to amend the several
acts incorporating the town of Memphis,' passed Dec. 7, 1843; also,
an act entitled 'An Act to reduce the several acts incorporating
the town of Memphis into one act, and to amend the same,' passed
Jan. 11, 1848; also, an act entitled 'An Act to incorporate into
one act the several acts incorporating the City of Memphis and the
Town of South Memphis,' passed Jan. 6, 1846, and Jan. 21, 1848, and
to 'unite the said towns into one, and extend the boundaries
thereof,' passed Dec. 3, 1849; also, the section of an act entitled
'An Act to amend an act entitled An Act to incorporate the town of
Tazwell,' passed Jan. 2, 1830, passed Jan. 28, 1852; also, an act
entitled 'An Act to amend the charter of the City of Memphis,'
passed Feb. 29, 1856; also, an act entitled 'An Act to amend the
charter of the City of Memphis, and for other purposes,' passed
Feb. 20, 1860; also, an act entitled 'An Act to amend the charter
of the City of Memphis,' passed Nov. 24, 1866; also, an act passed
in amendment
Page 102 U. S. 478
of the foregoing acts, and also any other acts creating into a
body politic and corporate the inhabitants of a certain territory
lying within the County of Shelby, by the name of the City of
Memphis, the Mayor and Aldermen of Memphis, or other corporate name
whatever, or acts amending the said acts of incorporations be, and
the same are hereby, each and every one of them, repealed, and all
offices created and held under and by virtue of any of said acts
are abolished."
"SEC. 2. That the charters and amendments thereof of all
municipal corporations within the state, having a population of
thirty-five thousand inhabitants or over, by the federal census of
1870, be, and the same are hereby, repealed, and all municipal
offices held under them are abolished."
"SEC. 3. That the charters and amendments thereof of all
municipal corporations within this state having thirty-five
thousand inhabitants or over, at the date of the passage of this
act be, and the same are hereby, repealed, and all municipal
offices held thereunder are abolished. The governor of the state
will ascertain and declare, by proclamation, to what corporations
this section applies; said proclamation shall be conclusive
evidence of its truth, and shall be made within ten days from the
passage of this act."
"SEC. 4. That all of the sections, from section 33 to section
80, both inclusive, of an act entitled 'An Act to regulate and
organize municipal corporations of certain population, and for the
increase and diminution of their powers,' chapter 92, approved 23d
March, 1875, and all other acts and parts of acts in conflict with
this act, be, and the same are hereby, repealed; all the other
sections of said chapter 92, and especially section 81 of said
chapter, being left in full force; and the population within the
territorial limits as now defined, and the territory of all
municipal corporations heretofore governed under and by virtue of
said repealed sections 33 to 80, inclusive, are hereby resolved
back into the body of the state, and all offices held under and by
virtue of said repealed sections are hereby abolished; and all
power of taxation, in any form whatever, heretofore vested in or
exercised by the authorities of said municipal corporations by
virtue of any of the acts of incorporation hereinbefore recited, or
otherwise, is forever withdrawn and reserved to the legislature;
and the public buildings, squares, promenades, wharves, streets,
alleys, parks, fire engines, hose and carriages, horses and wagons,
engine houses, engineer instruments, and all other property, real
and personal, hitherto used by such corporations for municipal
purposes, are hereby transferred to the custody and control
Page 102 U. S. 479
of the state, to remain public property, as it has always been,
for the uses to which said property has been hitherto applied. And
no person holding office under and by virtue of any of said
repealed sections, or any of the acts above recited, shall, from
and after the passage of this act, exercise or attempt to exercise
any of the powers of functions of said office."
"SEC. 5. That this act take effect from and after its passage,
the public welfare requiring it."
"Passed Jan. 29, 1879. Approved Jan. 31, 1879."
"
CHAPTER 11, Acts of 1879"
"
A Bill to establish Taxing Districts in this state, and
to"
"
provide the Means of Local Government for the
same"
"SEC. 1. That the several communities embraced in the
territorial limits of all such municipal corporations in this state
as have had or may have their charters abolished, or as may
surrender the same under the provisions of this act, are hereby
created taxing districts, in order to provide the means of local
government for the peace, safety, and general welfare of such
districts."
"SEC. 2. That the necessary taxes for the support of the
governments thus established shall be imposed directly by the
General Assembly of the State of Tennessee, and not otherwise. In
administering the affairs, and for providing the means of local
government in said districts, the following agencies and governing
instrumentalities are hereby established:"
"1st, A board of fire and police commissioners, to be selected
and qualified in the manner hereafter provided."
"2d, A committee on ordinances or local laws, to be known as the
'Legislative Council of the Taxing District,' and which shall
consist of the commissioners of the fire and police board, and the
supervisors of the board of public works."
"3d, A board of health, to consist of the chief of police, a
health officer, and one physician who shall have been in active
practice for the period of five years next preceding his
appointment, who shall be an inhabitant of the taxing district, and
for five years a resident of the county, and who shall be
ex
officio president of the board."
"4th, A board of public works, to consist of five supervisors of
public works, three of whom shall be chosen by the qualified voters
of the people of the taxing district, and two appointed as
hereinafter provided, and shall serve for a term of two years."
"
* * * *"
Page 102 U. S. 480
"SEC. 11. That the diversion of any portion of any of said
taxes, or wharfage dues, or other funds, from the purpose for which
they were levied, by any of the commissioners, or by the trustee,
shall be a felony, for which the guilty party upon conviction shall
suffer imprisonment in the Penitentiary at hard labor for two
years."
"SEC. 12. That said commissioners shall not issue any bonds,
notes, script, or other evidences of indebtedness, and shall in no
event contract for work, or material, or services, in excess of the
amount of tax levied for such work, material, or service for that
year, and parties contracting with said commissioners for work,
material, or services shall look alone to the tax for that purpose
for that year, and no subsequent tax shall be levied to meet the
deficit, and no property, real or personal, held by said
commissioners for public use, shall ever be subject to execution or
attachment, or seizure under any legal process, for any debt
created by said commissioners, and all taxes due, or moneys in the
hands of the county trustee, or on deposit, shall be exempt from
seizure under attachment, execution, garnishment, or other legal
process. And said commissioners and said trustee and other
governing agencies employed by this act are expressly prohibited
from levying any taxes for any purpose, that power being reserved
to the legislature, and no writ of mandamus or other process shall
lie to compel them to levy any taxes; nor shall the said
commissioners or said trustee, nor the local government created by
this act, pay or be liable for any debt created by said extinct
corporation, nor shall any of the taxes collected under this act
ever be used for the payment of any of said debts."
"
* * * *"
"SEC. 14. That the fire engines, hose and carriages, horses and
wagons, engine houses, public buildings, public squares, parks,
promenades, wharves, streets, alleys, engineer instruments, and all
other property, real and personal, hitherto used by such
corporations for purposes of government, are hereby transferred to
the custody and control of said board of commissioners, to remain
public property, as it has always been, for the uses to which said
property has been hitherto applied, and that all indebtedness for
taxes or otherwise, whether in litigation or otherwise, due to the
said municipalities, shall vest in and become the property of the
state, to be disposed for the settlement of the debts of said
extinct municipalities as shall be hereafter provided by law, and
all suits now pending shall be prosecuted to final determination
under the provisions
Page 102 U. S. 481
of this act, without change of parties, and suits brought by
said taxing districts shall be brought in the name of the president
of fire and police commissioners;
provided, however, that
the taxes heretofore assessed as privilege taxes, and set apart for
the payment of the police and firemen, shall be paid out as
collected, under the provision of this act, to the said police and
firemen."
"
* * * *"
"SEC. 25. That this act shall take effect from and after its
passage."
"Passed Jan. 29, 1879. Approved Jan. 31, 1879."
On February 7, the complainants, by leave of the court, filed an
amended and supplemental bill, to which the City of Memphis, John
R. Flippin, Mayor of the city, and W. J. Chase, W. Hewitt, James
Elder, Simon Green, H. G. Dent, Marcus Jones, W. H. Brown, J. W.
Moores, W. Benjes, George Haesinger, composing the Board of
Aldermen of Memphis, James Bohan, D. T. Goodyear, W. P. Proudfit,
Charles Quentel, Sen., J. H. Surdam, J. H. White, W. H. Bates, M.
Selig, L. L. Lawhorn, P. O. Wood, Andrew Renkert, Herman Caro,
Thomas Boyle, Peter Tracey, W. J. Crosbie, W. O. Harvey, Thomas
Barrett, P. M. Patterson, L. D. Grant, William Bradford, composing
the board of common councilmen of the city, altogether constituting
the general council of the city, and as trustees and
representatives of the corporators; also George B. Fleece, trustee
of Shelby County, Tennessee, and
ex officio tax collector
of the city, the German National Bank of Memphis, J. W. Moores,
former tax collector of the city, and Joseph Uhl, clerk of the
Circuit Court of Shelby County, Tennessee, all residents and
citizens of that county, were made defendants. The bill, after
reaffirming the averments of the original bill, charges, among
other things, that the complainants, as creditors of the
corporation and having valid debts against it, are not and cannot
be deprived of the vested rights secured to them by previous
legislation; that said chapters 10 and 11 of the acts of 1879, so
far as they attempt to impair those rights or divert the assets of
the corporation from the reach or control of its creditors, are
unconstitutional and void. The bill, after charging that upon the
passage of said chapters 10 and 11 the mayor and other officers of
the city who
Page 102 U. S. 482
were charged by law with the collection of taxes, and who held
the same in trust to be applied in satisfaction of the
complainants' debts, abandoned their offices and trusts and left
the latter unexecuted; that before the repeal of the charter of the
city, there was in the hands of certain of the defendants a large
amount belonging to the special trust and mandamus funds; and that
all the property of the city, real and personal, including past due
and unpaid taxes, constitutes assets for the benefit of her
creditors which should be brought in and marshaled for the payment
of her debts -- prays that it may be taken and considered as a
general creditor's bill for all who may come in within a time to be
limited, and that a receiver be appointed and empowered and
directed to take charge of all the tax books and papers of the
city, and her records and books of every description, together with
all the tax books, bills and accounts for all taxes theretofore
levied by her for all purposes which have not been collected and
are yet due and unpaid; that he be empowered to collect the same by
distress warrants, or in any manner deemed expedient by the court,
and bring or prosecute any suit or suits in any court for the
collection of the same; that until the rights of all persons be
determined, he be instructed and required to keep separate accounts
of each class of taxes collected as appear on the various tax books
of the city; that he be empowered to take charge of all money now
on hand which has been collected from any source for taxes, rents,
or otherwise; that all parties be required to pay the said funds to
him, of which he shall keep separate accounts, and pay the same out
to the parties entitled under the order of the court; that he be
directed to take charge of all the real estate of the city of
whatever description and wherever situated in which she has any
interest, equitable or legal; that he take possession of all the
personal property of every kind belonging to the city at the time
of her dissolution, but that, for the time being and until the
rights of parties shall have been determined and some arrangements
be made, the fire engines, hose and horses, and paraphernalia of
the fire department be not interfered with so as to destroy or
impair its efficiency; that when the assets are collected they be
disbursed under the order of the court to the parties to
Page 102 U. S. 483
whom they belong in law, or as the different parties are
entitled; that he be empowered to sell any part of said assets from
time to time, or all of the same, together with such further powers
and instructions as may from time to time be necessary to bring
other parties before the court; that if the present assets are not
sufficient to pay all the debts, assessments be made upon all the
corporators and property in the city for any claims that may remain
unpaid of said debts, whether due or not, and that judgments be
rendered against said parties for amounts found due; that such
accounts be taken to ascertain the amounts of debts as may be
deemed expedient, and complainants' debts paid.
Jan. 30, 1879, Hopkins Loudon filed his bill against the City of
Memphis to recover money due for laying pavements. On February 6,
he filed an amended bill, averring that since filing his original
bill he had recovered a judgment for the amount of his claim.
Bills were filed by other judgment creditors of the city, as
follows:
February 3, by the Ahrens Manufacturing Company against George
B. Fleece, trustee of Shelby County, D. T. Goodyear, president of
the common council and ex officio mayor, J. C. Neely, city
treasurer, and James A. Newsom, city comptroller.
February 7, by Tallmadge E. Brown against the City of Memphis,
John R. Flippin, its former mayor, Marcus Jones, the president of
the board of aldermen, D. T. Goodyear, the chairman of the common
council, James C. Neely, former city treasurer, the German National
Bank, the First National Bank, the state National Bank, Joseph Uhl,
clerk of the Circuit Court of Shelby County, George B. Fleece,
county trustee of Shelby County, Benjamin F. Coleman, and James W.
Moores, all citizens and residents of Shelby County.
February 10, by Fairman Rogers and others against the city, said
Flippin, Jones, Goodyear, Neely, James A. Newsom, late comptroller,
James H. Humphreys, late city engineer, Michael McFadden, late
chief of the fire department, W. A. McCloy, late city register,
James W. Moores, late back tax collector, Joseph Uhl, clerk of the
Circuit Court of Shelby County, George B. Fleece, county trustee of
Shelby County,
Page 102 U. S. 484
the German National Bank, the state National Bank, and the First
National Bank, John F. Frank and D. T. Porter, W. W. Guy and John
Overton, Jr., styled the board of fire and police commissioners of
the Taxing District of Memphis, and against all other persons and
corporations who have an interest in the subject matter of the suit
and might make themselves parties thereto.
February 12, the court ordered that the several causes be
consolidated, and appointed T. J. Latham receiver. The order
directs that he
"first enter into a bond of the penal sum of fifty thousand
dollars, with two or more securities, to be approved by the court,
conditioned for the faithful performance of his duties as such
receiver. He will also take an oath faithfully and impartially to
discharge the duties of his said office. Such bond and oath shall
be filed and remain of record in court here."
"After so qualifying, the said receiver will demand and receive
and take possession of all the assets and property of the City of
Memphis, including real and personal property and debts due to it,
and taxes due and owing to it, except the taxes appearing on the
tax books for the year 1878, for which special provision is herein
made, and except also the public highways of the city, the public
squares, the public landings and wharves, the engine houses, the
fire engines, and the horses belonging to the fire department, the
hose, the hose carriages, and the other property and appurtenances
of the said department, the hospital, and the property and
appurtenances belonging thereto or used in connection therewith,
the horses, wagons, tools, and implements and other property used
in connection with and necessary to the Engineers' Department of
the City of Memphis, the property belonging to and used in
connection with the police department of the city, and the taxes
heretofore levied for the support of the public schools of the
city; all which excepted articles and property are excluded from
the operation of this order, and will not be taken possession of or
interfered with by the said receiver until the further order of the
court."
"The said receiver will also take possession of all the tax
books of the City of Memphis whereon unpaid taxes due it are
Page 102 U. S. 485
charged, except the tax books for the year 1878, and the person
or persons having the same in charge will at once, on his demand,
surrender the same to him."
"He also will take possession and control of all the safes,
books, papers, desks, office furniture, and other property
belonging to the offices of mayor, comptroller, register,
treasurer, tax collector, inspector, city attorney, necessary to
the discharge of his duties as receiver, and of the buildings
wherein the general council of the city has heretofore assembled,
and the property in or belonging to such buildings not previously
herein excepted from the operation of this order, and the large
safe in the mayor's office, and will safely keep the same, subject
to the order of the court herein; and the person or persons having
possession or control of the said property, or any part thereof,
are hereby required to surrender the same to him on demand."
"And the said receiver will, as soon as he can conveniently,
make and file a full and true inventory of all the property of
every description which may come to his control or possession as
such receiver."
"The defendant, George B. Fleece, as county trustee of Shelby
County, from time to time as he collects taxes levied by the City
of Memphis for the year 1878, except taxes levied for the support
of the public schools, will at once pay over the sums he collects
to the said receiver, in the lawful money of the United States,
taking his receipt therefor, which shall be a protection and
discharge to him for the sums so paid. He will also at once, on the
demand of the said receiver, pay to him all the moneys he has on
hand collected for and on account of taxes levied by the City of
Memphis for the year 1878, except sums collected on account of
taxes levied for the support of the public schools, and will take
his receipt therefor, which shall be a protection and discharge for
the amount so paid."
"The defendant, James C. Neely, as former City Treasurer of the
City of Memphis, and the German National Bank of Memphis, will at
once, on the demand of the said receiver, turn over to him all the
money in his hands or on deposit in the said bank received by him
on the account of the City of Memphis,
Page 102 U. S. 486
except moneys received for taxes levied for the support of
public schools, and take his receipt therefor, and such payment
shall be a full acquittance and discharge for the sums so
paid."
"The defendant, John R. Flippin, as late Mayor of the City of
Memphis, will, on demand of the said receiver, pay over to him any
money and deliver to him any property he has belonging to the said
city, except the large safe in the mayor's office, and the papers
and vouchers not necessary for the receiver in the discharge of his
duties, and take his receipt therefor, which shall be a complete
acquittance and discharge for the sum so paid and the property so
delivered."
"The defendant, Joseph Uhl, as Clerk of the Circuit Court of
Shelby County, will at once, on demand of the said receiver, pay
over to him the money he has on hand received on the account of
redemption of property sold for taxes due the said city, except
such money as may have been received on account of taxes levied for
the support of the public schools, and take his receipt therefor,
which shall be an acquittance and discharge for the sum so paid,
and he will hereafter from time to time, as he receives other
moneys on the said account, pay over the same as aforesaid, with
the exception aforesaid, to the said receiver, and take his receipt
therefor, which shall be an acquittance and discharge for the sums
so paid."
"The defendant James W. Moores will at once, on the demand of
the said receiver, pay over to him any moneys in his hands received
for or on account of taxes levied by the City of Memphis, except
such sums as may have been received for taxes levied for the
support of the public schools, and deliver him all the city tax
books in his hands, and take his receipt therefor, which shall be
an acquittance and discharge for the sums so paid and for the said
tax."
"The said receiver will at once proceed to ascertain what
property, real and personal, other than that hereinbefore specified
or mentioned in the bills herein, the City of Memphis owns,
including such as it has become the owner of by purchases at sales
for non payment of taxes, and will take possession of such property
where the possession is voluntarily surrendered, and report the
same to the court, to the end that a proper disposition may be made
thereof. "
Page 102 U. S. 487
"In the meantime, he is authorized to rent the property he may
so obtain possession of from month to month, and to collect the
rents, and hold the same subject to the order of the court. As soon
as the said receiver is in possession of the funds already
collected and on hand, and hereinbefore directed to be turned over
to him, he will at once deposit the same in some solvent bank or
banks in Memphis, to the credit of the clerk of this court, to be
drawn out only by the order of this court, and report the same to
the court, and in such report will show the amount received from
each particular person on account of each particular tax, the year
for which the same was levied, whether the tax on account of which
the same has been paid was levied for the benefit of any particular
person or persons or class of persons, and if so, who such person
or persons or class of persons are, and the proportions in which
they are or claim to be entitled to share such fund or funds, and
the amount thereof to which each one is or claims to be
entitled."
"And, from time to time, as he hereafter receives other moneys
under this order or as such receiver, he will in the manner above
directed deposit the same, and on the first and third Mondays of
each month the said receiver shall make and file with the clerk a
report, similar to that required above, of the funds that may have
been paid over to him. The said receiver, as soon as he receives
the tax books herein ordered to be delivered to him, will proceed
in such manner as he may deem best to demand and collect all the
unpaid taxes appearing on the said tax books, levied by and due to
the City of Memphis, in the lawful money of the United States, and
keep a proper account of such collections, showing therein the
particular tax or taxes from which each sum is derived, and the
year for which the same was levied and the purpose for which
levied."
"If he finds it necessary, the said receiver may bring actions
at law or suits in equity against any party or parties owing any
debt due to the City of Memphis, or any tax or taxes appearing on
the said tax books, for the recovery of the same, and in such
actions or suits he may also proceed to enforce any specific lien
or liens on any property, real or personal, for
Page 102 U. S. 488
the payment of such tax or taxes, and to have the same sold for
the satisfaction thereof. He may also, in proper cases, employ the
process of garnishment and all other proper process. He may bring
the party or parties owing such tax or taxes by petition in this
cause before this court, or he may sue at law in this court in
proper cases."
"He may also, where he deems it best to do so, bring actions at
law or suits in equity in the courts of the state, or make himself
a party to any suit or suits already pending in such courts, where,
by so doing, he may effect a collection of such tax or taxes, or
any part thereof, and he is authorized to demand and receive and to
receipt for all moneys heretofore collected, or which hereafter may
be collected, on any judgment or decree heretofore rendered in
favor of the City of Memphis, belonging to the said city, whether
such judgment or decree is in this court or any other court of the
United States, or any court of the State of Tennessee."
"He is hereby given authority to employ as many clerks and
assistants as may be necessary to enable him to discharge the
duties of his said office promptly and efficiently, who shall be
paid a reasonable compensation out of the assets which may come to
his hands, to be fixed hereafter by the court."
"The said receiver will make use of the building and offices
formerly occupied for a city hall, and belonging to the City of
Memphis, or such part thereof as may be necessary for his purposes,
and will make use of such safes, desks, tables, chairs, and other
furniture and property of the City of Memphis as he may have need
of; but he will file in court here, as soon as he can conveniently
make the same, a correct and full description and inventory of all
the property he may use."
"The said receiver is hereby authorized to buy and pay for the
necessary books and stationery, the necessary fuel and lights, and
whatever else may be necessary property to fit his office or
offices for use, and to enable him efficiently to discharge the
duties imposed on him; but such expenditures shall always be
subject to the control and approval or rejection of the court."
"The said receiver is also hereby authorized to insure any
Page 102 U. S. 489
property, real or personal, which may come to his hands as such
receiver, where he deems it prudent to do so."
"The said receiver is also empowered to employ one or more
attorneys, if necessary, to conduct the prosecution or defense of
any suit or suits he may find it necessary to bring, prosecute, or
defend, under the authority hereby conferred upon him. The
compensation of such attorney or attorneys shall be fixed by the
court hereafter, and shall be paid out of the assets which may come
to the hands of the said receiver, in such manner as the court may
direct."
"The several persons and corporations upon whom the process of
garnishment have been served under the executions issued on the
judgments of a portion of the plaintiffs in these suits, as appears
by the bills herein, and who are parties hereto, are hereby
directed to deliver or pay to the receiver herein appointed, on his
demand as hereinbefore ordered, all the property, money, and
effects in their hands or under their control, respectively,
belonging to the City of Memphis, and upon their severally doing so
they are hereby severally discharged as such garnishees."
"It is further ordered, that all persons having debts or claims
of any character against the City of Memphis have leave to make
themselves parties to these consolidated suits on or before the
third Monday of May next, by severally filing petitions herein,
setting forth their respective debts or claims, and that the clerk
of this court at once give notice by publication in one of the
daily morning papers published in Shelby County, for sixty days,
that such persons are hereby required within the time aforesaid so
to make themselves parties, and file their debts and claims."
By sec. 5 of chap. 84, acts of 1879, passed March 12, 1879, and
approved March 13, 1879, sec. 14 of chap. 11 of the acts of that
year was amended so as to read,
"That the fire engines, hose and carriages, horses and wagons,
engine houses, public buildings, public grounds, parks, promenades,
wharves, streets, alleys, engineer's instruments, and all other
property, real and personal, hitherto used by such corporations for
purposes of government, are hereby transferred to the custody and
control of said board of commissioners, to remain public
property,
Page 102 U. S. 490
as it has always been, for the uses to which said property has
hitherto been applied, and that all indebtedness for taxes or
otherwise, whether in litigation or otherwise, due to the said
municipalities, shall vest in and become the property of the state,
to be disposed of for the settlement of the debts of said extinct
municipalities, as shall be hereafter provided by law, and suits
brought by said taxing districts shall be brought in the name of
the President of the Board of Fire and Police Commissioners."
On March 13, 1879, the legislature passed the following act:
"
CHAPTER 92, OF ACTS OF 1879"
"
An Act to collect and dispose of the Taxes assessed for
Municipal Corporations in this state whose Charters have been or
may be repealed, or which may surrender their Charters, and to
provide for the Compromise and make Settlement of the Debts of such
Extinct Municipal Corporations respectively."
"SEC. 1. Be it enacted by the General Assembly of the State of
Tennessee, that as to municipal corporations in this state, whose
charters may have been repealed at the time this act takes effect,
and, from time to time, as the charters of other municipal
corporations may be repealed or surrendered, the governor of the
state shall appoint an officer for such extinct corporations
respectively, to be known as a receiver and back tax collector, who
shall take the oath required of other collectors of public revenue,
and shall give bond with good sureties, to be approved by the
county court of the county in which the extinct corporation was
situated, in such sum as the county court may prescribe; and it
shall be the duty of the quarterly court, at each quarterly term
thereof, to see that the bondsmen continue good and adequate for
the full protection of all persons interested, and for that
purpose, from time to time, to require further and additional
sureties whenever such court deems the same necessary for the
protection of those interested."
"SEC. 2. That such receiver and back tax collector shall make to
the chancery court every three months a full, clear, and complete
statement, showing all taxes collected and settled, and all in his
hands that remain to be collected and settled. He shall, at the end
of each month, pay into the treasury of the state the whole sum by
him collected, less his compensation. He shall distinguish, in
making such payments, the respective sources from which the
Page 102 U. S. 491
moneys paid in are derived, showing what is collected from taxes
for general purposes, and what for taxes for special purposes,
designating the particular or special purpose, so that the same may
be kept separate in the state treasury, in order that the treasurer
may pay the same according to any lien, priority, or equity, if
any, which may be declared by the chancery court touching any of
said funds, in favor of any creditor or class of creditors."
"SEC. 3. That the back tax collector and receiver shall, as soon
as appointed, enter upon the duties of his office. It shall be his
duty, and he is hereby empowered, to take possession of all books,
papers, and documents pertaining to the assessment and collection
of the taxes embraced by this act."
"SEC. 4. That for the purpose of collecting the revenue embraced
in the provisions of this act, the receiver and back tax collector
is empowered and authorized to file a general creditors' bill in
the name of the state in behalf of all creditors against all the
delinquent taxpayers who owed taxes to the extinct corporation at
the time of the repeal or surrender of its charter, which bill
shall be filed in the chancery court of the county in which such
extinct corporation was situated. All the said delinquents in any
one county shall be embraced in one subpoena to answer, and for the
same the clerk shall receive a fee of five cents for each defendant
named in the subpoena except for the first, and for that, the fee
allowed in other cases,
provided he shall not receive
exceeding twenty five dollars for such subpoena, and the sheriff,
for serving the same, shall receive for each defendant ten cents,
except the first, and for that, the fee allowed for like services
in other cases. Publication for nonresidents shall embrace in the
same publication, if practicable, all nonresident defendants -- the
object being to make one proceeding embrace the whole taxes of such
extinct corporation. All pending suits are to be received in the
name of the state and consolidated with the general proceedings
herein provided for, and when so consolidated, to form part of said
general proceeding. The court in which said proceeding may be
instituted shall have power to settle and adjust all equities,
priorities, and liens, and to give all relief both to the
defendants and the creditors that might be given if there were as
many separate suits as there are creditors and delinquent
taxpayers. Such court shall have power to enforce all liens upon
property for the payment of such taxes, and to order and make all
sales of property necessary to the collection of such taxes. The
taxes embraced by this act and which it provides for are all taxes
imposed by said extinct
Page 102 U. S. 492
municipalities up to the time of the repeal or surrender of
their charter. The chancery court, in the exercise of the
jurisdiction conferred by this act, shall have all the powers
possessed by such courts in the administration of the estates of
insolvent, natural, or corporate persons. If it shall appear that
the taxes imposed in any case were excessive, the court shall have
power to reduce the assessment so as to make it fair and just."
"SEC. 5. That back taxes imposed prior to the year 1875 may be
settled in the valid indebtedness of such extinct municipalities,
as provided by sec. 66 of an act passed March 20, 1875, entitled
'An Act to regulate and organize municipal corporations of certain
population, and for the increase and diminution of their powers,'
and, in addition to said act, as follows, to-wit, in valid bonds,
whether due or not, and due coupons, and any other valid debt of
such municipality with accrued interest, whether in the shape of
scrip, warrants, judgments, ledger balances, paving certificates,
or receipts for money paid by back taxpayers to paving contractors,
or to the said corporation for Nicholson or stone paving done under
former laws and ordinances authorizing front foot assessments for
paving, and the back tax collector and receiver is hereby required
to accept the same at the following rates, to-wit, bonds known as
compromise or funded bonds shall be received at their face value,
all other bonds, scrip, certificates of indebtedness, past due
coupons, ledger balances, &c., shall be received at fifty cents
on the dollar, or one half their face value, and all judgments
shall be received at fifty-five cents on the dollar of their face
value,
provided compromise bonds issued in lieu of any
bonds which have been pronounced invalid by the supreme court of
this state shall be excluded so far as such invalid bonds shall
compose a part or the whole of such compromise bonds, and
compromise bonds issued in whole or in part in lieu of bonds liable
by implication, on account of over issue or otherwise, to a similar
decision of the supreme court, shall not be received, so far as
they may be composed in whole or in part of such suspected bonds,
until the validity of such suspected bonds shall be determined by
the supreme court of the state, and the aforesaid bonds, coupons,
scrip, &c., shall be received with interest added, if there be
interest, in payment of taxes imposed prior to 1875, whether before
or after judgment or decree against the delinquent taxpayers in
satisfaction of such taxes, or by way of set off against taxes due
such extinct municipalities, whether acquired before or after suit
brought against a delinquent taxpayer. But before being required to
accept the
Page 102 U. S. 483
same, such back tax collector and receiver may, if he chooses
and if he suspect the debt not valid, or if any creditor gives him
notice that it is not, then before taking it he shall, on motion in
the general suit, have the question settled by the chancellor
whether such indebtedness is valid or not, and it shall be the duty
of such receiver and back tax collector to receive in payment of
taxes imposed after 1874 any of the aforesaid valid indebtedness of
the extinct municipality, when there is no lien or equity requiring
the same to be paid in current money, and whenever any question may
be raised as to the right of the taxpayer to pay taxes imposed
after 1874 on the said indebtedness of the extinct municipality,
the court shall determine the same on motion at the instance of the
parties interested,
provided, however, that in every case
where a bond of any kind or character, whether it be a compromise
bond or other kind of bond, is received or taken up before
maturity, all immatured interest coupons shall be surrendered with
it, and no bond of any kind shall in any case be received before
maturity which has the interest coupons detached, and nothing shall
be allowed such immature coupons. All evidences of indebtedness
taken by said receiver in payment of taxes shall be cancelled by
him, as soon as the same comes into his hands, under the
supervision of the chancellor, and in such manner as he may order
and decree."
"SEC. 6. That when collections shall be made, or taxes paid, as
herein provided, or in current or in lawful money of the United
States, it shall not be lawful for such receiver and back tax
collector to coerce payment of a greater sum than one fifth part
annually, so as to distribute the whole through five equal annual
installments. The said period of five years shall begin from the
time of the appointment and qualification of the back tax collector
and receiver, and all costs of condemnations, penalties, and
charges are hereby remitted, in all cases where taxes are collected
under this act,
provided, however, that nothing herein
contained is intended to interfere with any vested right which
entitles the party having such right to a speedier collection, but
only to extend the indulgence where the state has the power to do
so without interfering with vested rights."
"SEC. 7. That funds collected under this act shall be paid out
by the treasurer of the state, from time to time, to those
entitled, in such manner as the chancery court may adjudge and
decree, on the warrant of the receiver, countersigned by the
chancellor."
"SEC. 8. That the compensation of the back tax collector and
receiver of the extinct corporation of Memphis shall be two
thousand
Page 102 U. S. 494
dollars per annum, but after two years the county court shall
fix the salary of said officer, not to exceed two thousand dollars
per annum, and of such other municipalities as this act may apply
to, such sum as the quarterly court of the county may allow, in no
case to exceed the sum that would be paid to the county trustee for
like service."
"SEC. 9. That the receiver and back tax collector shall have
power to employ an assistant at a compensation not to exceed one
hundred dollars per month during the time he is in actual
service."
"SEC. 10. That publication shall make all creditors, parties,
with the right to relief as fully as if especially named, and they
may at any time file with the clerk of the court their claims, or
attested copies, retaining the original if they desire, subject to
be produced, however, as the court may order, and placed in the
custody of the clerk. The simple filing of said claims,
respectively attested by the affidavit of the owner of his agent or
attorney, shall be proof of such claims in common form, and, if not
contested, entitle the same to payment pro rata; and for
administering the oath in proving such claims in common form, and
filing the same, the clerk shall receive the sum of ten cents, to
be paid at the time of making the oath and filing the claim. If any
creditor or the receiver and back tax collector shall desire to
contest the validity in whole or part of any claim filed in common
form, he may do so in a summary way in the progress of the cause.
The opposing parties in such contest shall reduce the facts to
writing that are necessary to its determination, and file the same,
and when filed they shall become part of the record, and the court
shall have power, upon motion, and in a summary way, to hear and
determine all questions of priority of payment in the progress of
the cause. When any party is dissatisfied with the decision of any
litigated question, he may have such question reheard upon appeal
or writ of error in the supreme court, but so much of the record
only as pertains to that particular litigation shall form the
transcript and record for the appellate court, and the costs shall
be paid by the parties to such appeal as the appellate court may
direct, unless the receiver and back tax collector is a party to
the litigation on behalf of creditors generally, and in that case
the costs may, if the appellate court think proper, be charged to
the whole, or to some particular fund, as right and justice may
require."
"SEC. 11. That nothing herein shall be construed to prejudice
the right of redemption now allowed by law to any person for
redeeming land hitherto sold for taxes, or that may hereafter
be
Page 102 U. S. 495
sold under the provisions of this act, and as to all lands
within the limits of such extinct municipalities heretofore sold
for taxes and bid off in the name of the state or the city, the
former or their heirs or vendees shall have five years from and
after the passage of this act within which to redeem the same, but
until such redemption, such property shall be and remain the
property of the state, and the owners, their heirs or vendees,
shall alone have the right to redeem."
"SEC. 12. That it is the duty of the attorney general of the
district wherein is situated the taxing district, as provided for
in the act aforesaid, and they are hereby required immediately to
suggest of record in all the courts of this state, and of the
United States, where suits are pending against said municipalities,
the repeal of the charters of the same."
"SEC. 13. That the proceedings in all suits now pending for the
collection of taxes due such extinct municipalities shall be
suspended until the filing of the general creditors' bill and the
consolidation provided for in this act, and said general creditors'
bill shall be prepared and filed by the receiver and back tax
collector as soon as practicable, and within six months from his
appointment and qualification, and to enable him to prepare said
bill he is authorized to employ, under the direction of the
chancellor, any cash funds that may come into his hands in
obtaining any necessary abstracts of title."
"SEC. 14. That this act shall take effect from and after its
passage, the public welfare requiring it."
"Approved March 14, 1879."
Pursuant to the provisions of said chapter 92, the Governor of
Tennessee appointed Minor Meriwether to be receiver and back tax
collector. Thereupon the complainants, April 10, 1879, filed in the
consolidated causes an amended and supplemental bill, to which
Meriwether, William F. Hardin, Joseph R. Williams, and John B. Hill
were, in addition to the persons mentioned in the original and
amended bills, made defendants. This bill, after stating the filing
of the original and amended bills by the various complainants,
alleging the contents thereof, the failure of the defendants to
either plead, answer, or demur thereto, the appointment of Latham
as receiver, the execution of his bond, and his entry upon the
duties of that office, and charging that said Meriwether, as
receiver and back tax
Page 102 U. S. 496
collector, is interfering with said Latham as receiver of the
court, and is impeding him in the collection of back taxes, and
discouraging and preventing payments to him; that the defendants,
Hardin, Williams, and Hill, who are citizens of and residents in
the City of Memphis, although indebted to it for taxes long overdue
and unpaid, refuse to pay them to said Latham as receiver, prays
that an injunction may issue restraining said Meriwether, his
agents and attorneys, and each of them, from demanding, taking
possession of, recovering, collecting or attempting to collect, or
in any way interfering with the assets and property, real,
personal, or mixed, or choses in action, of the City of Memphis,
including the debts due to her, taxes of every description
heretofore assessed and levied by or for her, and the evidences of
such assets, property, debts, and taxes, consisting of deeds,
bonds, bills, notes, accounts, books of assessment, tax books and
other books, and writings of every description, having reference to
such property, assets, debts, taxes, or any part thereof, and from
instituting or prosecuting any suits or actions of any kind
whatever in any court against the said Latham, as such receiver as
aforesaid, or against any other person or persons, for the recovery
of any part of the assets or property, debts, taxes aforesaid, or
any tax books, assessment books, or other books or writings of any
kind having connection therewith or reference thereto or to any
part thereof, and from doing any act or thing, and from making or
publishing in any manner whatsoever any declaration or notice,
printed, written, or verbal, asserting or tending to assert that
the right to the property or custody or control of the said assets
or debts or taxes of the City of Memphis, or property of any kind
thereof, or to collect or receive the same, is rightfully in him,
the said Meriwether, or is not in the said Latham, as such
receiver, or tending to persuade or advise, prevent, hinder, or
deter the persons owing debts or taxes to the City of Memphis from
paying the same to the said Latham, as such receiver; that an
account may be taken as to the amount of taxes or debts due from
each and every of the said defendants, Hardin, Williams, and Hill,
and the particular lot or lots of land upon which the said taxes
were assessed and levied, and upon which they constitute a lien,
and the
Page 102 U. S. 497
amount due and owing by them to the City of Memphis on account
of past due taxes or on any other account; that the complainants
may be subrogated to all the rights, claims, and liens of the said
City of Memphis against the said defendants severally; and that the
lien which the said defendant, the City of Memphis, held or holds
against or on the several lots and parcels of land aforesaid, on
account of said taxes assessed and levied thereon, may be declared
and fixed by decree for the benefit of the complainants and other
creditors in like attitude, and that personal decrees be also
rendered against each of said defendants for the amount found due
from them on the taking of the said accounts for the benefit of
complainants; and that unless said defendants shall severally pay
into the registry of this court by a day fixed the amounts so found
due from them on the claims aforesaid, that then the court decree
that said several parcels or lots of land be sold to satisfy the
amounts so found due on account of each as liens thereon, and in
order that all equity of redemption or repurchase shall be cut off
and for ever barred; that the said lots be sold on a credit of
seven months, and barring all right of redemption, and the proceeds
when realized be applied to the payment of the complainants' claims
herein, and other creditors in like attitude who may come in and be
made parties hereto.
The defendants demurred, setting up sundry grounds therefor. The
judges, upon consideration of the matters thereon arising, were
divided in opinion upon the following questions:
1st, whether, inasmuch as the first of the original bills filed
in these consolidated cases was filed in this court prior to the
29th of January, 1879, the date of the act of the General Assembly
of the State of Tennessee repealing the charter of the City of
Memphis, this court had or has any jurisdiction to seize and
impound the assets, revenues, and properties of the corporation in
being, described in complainants' bill, and to place those assets,
revenues, and properties in the hands of a receiver appointed by
the court to collect, administer, and disburse the same in the
payment of creditors of such corporation.
Page 102 U. S. 498
2d, whether the act of the General Assembly of the State of
Tennessee, entitled "An Act to repeal the charters of certain
municipal corporations, and to remand the territory and the
inhabitants thereof to the government of the state," passed Jan.
29, 1879, and approved Jan. 31, 1879, and which act in terms, as
shown therein, repealed the charter and all laws incorporating the
City of Memphis, was and is a valid law, or whether the said act is
contrary to the Constitution of the State of Tennessee or to the
Constitution of the United States, as against creditors holding
bonds and debts contracted prior to the repeal.
3d, whether this court has jurisdiction to seize and impound and
administer the assets, properties, and revenues of said municipal
corporation, when it appears that the mayor and other officers of
said municipal corporation have abandoned their offices and duties,
and where it also appears that the General Assembly of the state
has passed a series of these acts, one repealing the charter of
Memphis; the second, creating a taxing district in the same
territory and providing a government therefor; and the third, to
collect and dispose of the taxes assessed for municipal
corporations in this state, &c., being chaps. 10, 11, and 92 of
the acts of 1879.
4th, whether, if the act of the General Assembly repealing the
charter of the City of Memphis be valid, the effect thereof was to
extinguish all claims, debts, dues, and demands to and from said
municipal corporation, including the claims of the various
complainants in these causes.
5th, whether, if said act repealing the charter be declared
valid, and that the effect thereof was not to extinguish all
claims, debts, dues, demands to and from said municipal
corporation, this court has jurisdiction to collect the taxes which
had been lawfully assessed by said municipal corporation and due
before the repeal of its charter, but which have not been
collected.
6th, whether, if this court has jurisdiction to collect back or
delinquent taxes, it can do so by directing its receiver to sue the
delinquent taxpayers, and if so, in what court, state or federal,
must such suits be brought, or can the court, by proceeding in the
nature of garnishment, require the delinquent
Page 102 U. S. 499
taxpayers to come before the court and pronounce judgment
against each for the amount found to be due.
7th, whether this court has jurisdiction to enforce the lien on
real estate for taxes which the said municipal corporation
possessed by proceeding in these causes or otherwise.
8th, whether upon the entire record this court has jurisdiction
to entertain the bills and grant any relief to the complaints.
9th, whether after the taxes already levied and uncollected, due
said corporation, and the other property named in these bills,
shall have been ascertained to be insufficient to pay all the
creditors of said city, that then this court has power to bring in
all or any part of the inhabitants and corporators within the
limits of said dissolved corporation by process, and make
assessment against them or their property to pay the balance of
entire debt found owing from said corporation pro rata, and render
judgments and decrees against each of them for the
pro
rata share or amount found due from said dissolved
corporation, and enforce liens against specific property against
which taxes shall have been levied.
10th, whether where the charter of a municipal corporation has
been repealed the creditors of such municipal corporation have a
right to any relief, except such as the state, through and by its
legislative enactments, may afford to such creditors.
13th, whether the fourth section of the Act of the Legislature
of the State of Tennessee, approved Jan. 31, 1879, chapter 10, acts
1879, repealing the charter of the City of Memphis, and the
fourteenth section of an act of the said legislature, approved on
the thirty-first day of January, 1879, being chapter 11 of the acts
of said state for 1879, and act of the said legislature, approved
March 13, 1879, being chapter 92 of the acts of said legislature of
1879, and particularly sections 4, 5, 6, 7, 11, and 13 of said act,
as far as complainants are concerned, and the creditors who have
made themselves parties, and the receiver of this court who was
appointed before said act was passed, are in violation of the
Constitution of the United States and of the Constitution of the
State of Tennessee, and void.
The presiding judge being of opinion that the demurrers
Page 102 U. S. 500
were not well taken, they were overruled, whereupon, the
defendants electing to abide thereby, the court, May 28, 1879,
decreed that the complainants, and the other creditors who had made
themselves parties under the leave of the court, and such others as
might so make themselves parties, do have and recover of and from
the City of Memphis the several debts due them respectively, the
amounts of which would be fixed by the court, and that all the
assets and property of every description theretofore belonging to
the City of Memphis, or so much thereof as may be necessary for the
purpose, including taxes heretofore assessed and remaining unpaid
and due the city, be applied to the payment of such debts, to which
end said Latham, as receiver, was directed to retain possession of
all the assets and property, books, papers, and writings, placed in
his hands to be disposed of only as the court might order in the
progress of the suit, and that he collect the said assets and
property in the manner directed by the former orders for the
payment of the said debts. The court further decreed that the
defendant, Minor Meriwether, as receiver and tax collector, be
perpetually enjoined from taking possession of, collecting, or
attempting to collect, suing for, or in any way interfering with,
said assets, property books, papers, and writings, so in the
possession of or to be collected by said Latham as such receiver;
that all the property within the limits of the territory of the
City of Memphis is liable and may be subjected to the payment of
all the debts aforesaid owing by said city, and that such liability
shall be enforced thereafter from time to time in such manner as
the court might order and direct; that Latham, the receiver
aforesaid, recover of the defendant Williams the sum of $6,843.46,
of the defendant Hardin the sum of $954.85, and of the defendant
Hill the sum of $6,638.38, being the amount of taxes due by them
respectively to the City of Memphis; that executions issue on the
said several decrees, the right being reserved to enforce all liens
that might exist on any and all property for the payment of the
said sums or any part thereof.
Meriwether and the other defendants then appealed here.
Page 102 U. S. 501
MR. CHIEF JUSTICE WAITE announced the conclusions reached by the
Court as follows:
1. Property held for public uses, such as public buildings,
streets, squares, parks, promenades, wharves, landing places, fire
engines, hose and hose carriages, engine houses, engineering
instruments, and generally everything held for governmental
purposes, cannot be subjected to the payment of the debts of the
city. Its public character forbids such an appropriation. Upon the
repeal of the charter of the city, such property passed under the
immediate control of the state, the power once delegated to the
city in that behalf having been withdrawn.
2. The private property of individuals within the limits of the
territory of the city cannot be subjected to the payment of the
debts of the city, except through taxation. The doctrine of some of
the states, that such property can be reached directly on execution
against the municipality, has not been generally accepted.
3. The power of taxation is legislative, and cannot be exercised
otherwise than under the authority of the legislature.
4. Taxes levied according to law before the repeal of the
charter, other than such as were levied in obedience to the special
requirement of contracts entered into under the authority of law,
and such as were levied under judicial direction for the payment of
judgments recovered against the city, cannot be collected through
the instrumentality of a court of chancery at the instance of the
creditors of the city. Such taxes can only be collected under
authority from the legislature. If no such authority exists, the
remedy is by appeal to the legislature, which alone can grant
relief. Whether taxes levied in obedience to contract obligations
or under judicial direction can be collected through a receiver
appointed by a court of chancery, if there be no public officer
charged with authority from the legislature to perform that duty,
is not decided, as the case does not require it.
5. The receiver and back tax collector appointed under the
authority of the Act of March 13, 1879, is a public officer,
clothed with authority from the legislature for the collection of
the taxes levied before the repeal of the charter. The funds
Page 102 U. S. 502
collected by him from taxes levied under judicial direction
cannot be appropriated to any other uses than those for which they
were raised. He, as well as any other agent of the state charged
with the duty of their collection, can be compelled by appropriate
judicial orders to proceed with the collection of such taxes by
sale of property or by suit or in any other way authorized by law,
and to apply the proceeds upon the judgments.
6. The bills in this case cannot be amended so as to obtain
relief against the receiver and back tax collector without making
an entirely new suit. They were not framed with a view to any such
purpose.
7. The decree of the court below is reversed.
8. The cause is remanded, with instructions to dismiss the bills
without prejudice. If, on the settlement of the accounts of the
receiver herein, it shall be found he has any money in his hands
collected on taxes levied under judicial direction to pay judgments
in favor of any persons who have become parties to this suit, an
order may be made directing its appropriation to the payment of
such judgment.
Upon the first, second, third, and fifth of these propositions
the judgment of the Court is unanimous. Upon the fourth, sixth,
seventh, and eighth, it is by a majority only.
MR. JUSTICE FIELD delivered the following opinion for himself,
MR. JUSTICE MILLER, and MR. JUSTICE BRADLEY.
Mr. Justice Miller, Mr. Justice Bradley, and myself concur in
the judgment rendered, but, as the judgment is not accompanied by a
statement of the reasons on which it is founded, I proceed to state
those which have controlled us.
In January, 1879, the City of Memphis, in the State of
Tennessee, was financially in a bad condition. She had been for
many years a municipal corporation, and was invested with the
ordinary powers of such bodies to make contracts and incur
obligations for municipal purposes, and to levy and collect taxes
to meet her expenditures. Her authorities were also at different
times specially empowered by the legislature of the state to
subscribe for stock in railroad corporations, to aid in the
construction of lines of railway leading to and from
Page 102 U. S. 503
the city, and to issue interest bearing bonds for the amount
subscribed; also to issue bonds of like character to raise the
means to erect water works, construct pavements, and make "any
public improvements" that might be necessary, and to acquire
property for the public use of the city. Indeed, the powers
conferred at various times upon the authorities to undertake public
works, and engage in enterprises for the benefit of the city, were
as large as the supposed necessities of a municipality with great
expectations of future growth could suggest, and these powers
appear to have been exercised with a liberality proportionate to
the expectations. Taxes were levied to meet the consequent
expenditures of the city and the interest on her bonds, but these
were not always enforced with the readiness with which the
obligations were incurred.
The record shows that for several years preceding 1879, not more
than three fifths of the annual taxes were collected. Whether this
arose from the viciousness of the system of taxation adopted or the
inefficiency of the officers of collection is immaterial. Probably
it arose partly from both causes. The natural result followed: the
revenues received became insufficient to meet the just claims of
creditors; obligations were not paid as they matured; coupons for
interest on bonds were not provided for; the city was in default
for much of the principal and all of the interest of her
indebtedness -- she was insolvent. Suits were soon commenced
against her by creditors, some in the federal courts, some in the
state courts, and from the federal courts in several cases a
mandamus was issued to the authorities of the city to levy a
special tax for the payment of judgments recovered. With taxes
uncollected, debts maturing, and both principal and interest
unprovided for; with numerous suits commenced and more threatened;
with credit gone and the property of her citizens already subjected
to burdens difficult to be borne, the city was in a condition out
of which she was almost helpless to extricate herself.
While the city was thus burdened with debts and pursued by
creditors, the state interfered, and on the 29th of January, 1879,
repealed the charter of the city, took the immediate control
Page 102 U. S. 504
and custody of her public property, and afterwards assumed the
collection of the taxes levied and their application to the payment
of her indebtedness.
The repealing act was in terms general, and applied to all
municipal corporations in the state having thirty-five thousand
inhabitants at the date of its passage, to be ascertained by the
governor, and declared by his proclamation. The City of Memphis had
that number of inhabitants, and it was so proclaimed by the
governor. The act not only repealed the charters of all such
corporations, with their amendments, but declared that all
municipal offices held under them were abolished, that the
population within their territorial limits were resolved back into
the body of the state, that all power of taxation in any form
previously invested in their authorities was withdrawn and reserved
to the legislature, and that the public buildings, squares,
promenades, wharves, streets, alleys, parks, fire engines, hose and
carriages, engine houses, engineer instruments, and all other
property, real and personal, previously used for municipal purposes
were transferred to the custody and control of the state, to remain
public property as previously it always had been.
On the same day with the passage of the repealing act, the
legislature passed another act to establish taxing districts in the
state and to provide the means for their local government. It
declared that the several communities embraced in the territorial
limits of the repealed corporations, and of such other corporations
as might surrender their charters under the act, were created
taxing districts in order to provide the means of local government
for their peace, safety, and general welfare; that the necessary
taxes for the support of the governments thus established should be
imposed directly by the General Assembly, and not otherwise; that
in administering the affairs and providing the means of local
government, the following agencies and instrumentalities were
established -- namely a board of fire and police commissioners; a
committee on ordinances or local laws, to be known as the
legislative council of the taxing district; a board of health, and
a board of public works; and it prescribed in detail the duties and
powers of these local agencies. The act prohibited the
Page 102 U. S. 505
commissioners from issuing any bonds, notes, scrip, or other
evidences of indebtedness or from contracting for work, material,
or services in excess of the amount levied for them for that year,
and declared that no property, real or personal, held by them for
public use should ever be subject to execution, attachment, or
seizure under any legal process for any debt created by them; that
all taxes due, or moneys in the hands of the county trustee, or on
deposit, should be exempt from seizure under attachment, execution,
garnishment, or other legal process. It also declared that no writ
of mandamus or other process should lie to compel them or other
governing agencies to levy any taxes, and that neither the
commissioners nor trustee nor the local government should be held
to pay or be liable for any debt created by the extinct
corporations, and that none of the taxes collected under the act
should ever be used for the payment of any of said debts. The act
also declared that all the property previously used by the
corporations for purposes of government was transferred to the
custody and control of the board of commissioners of the taxing
districts, to remain public property for the uses to which it had
previously been applied, and that all indebtedness for taxes or
otherwise, whether in litigation or not, due to the extinct
municipalities, should vest in and become the property of the
state, to be disposed of for the settlement of their debts as
should thereafter be provided by law.
On the 13th of March following, such provision was made. By an
act passed by the legislature on that day, the governor was
directed to appoint an officer for municipal corporations, whose
charters had been repealed under the first act mentioned or might
be subsequently surrendered, to be known as a receiver and back tax
collector. It required him to take possession of all books, papers,
and documents pertaining to the assessment and collection of taxes,
which had been levied at the time of the repeal of the charters. It
ordered him to file a bill in the chancery court of the county in
which the corporation was situated, in the name of the state, in
behalf of all creditors against all its delinquent taxpayers, and
provided that taxes assessed prior to 1875 might be settled in the
valid indebtedness of the extinct municipality, whether due or
Page 102 U. S. 506
not, and that the receiver should receive evidences of such
indebtedness at certain designated rates. It also prohibited him
from coercing payment of a greater sum than one-fifth of the taxes
in arrears annually, so as to distribute the whole through five
equal annual installments, commencing from his appointment and
qualification. It authorized the chancery court to enforce all
liens upon property for the payment of taxes and to order all sales
necessary for their collection, and to settle and adjust all
equities, priorities, and liens, and to give to the defendants and
creditors all the relief which might be given if there were as many
separate suits as there were creditors and delinquent taxpayers. It
provided that the taxes, as collected, should be paid into the
state treasury and be paid out to parties entitled to receive them,
as adjudged by the chancery court, upon the warrant of the
receiver, countersigned by the chancellor. It required the
receiver, in paying the money collected into the treasury, to
distinguish the sources whence it was derived, showing the amount
from each special and general tax, so that they might be kept
separate, and be paid out to creditors according to the priority,
lien, or equity determined. The act was accompanied with a proviso
that it should not interfere with any vested rights entitling
parties to a speedy collection. On the passage of the repealing
act, there was a large amount of uncollected taxes which had been
levied upon property in the City of Memphis, such as taxes to pay
certain specified creditors under writs of mandamus, a special tax
to pay interest upon bonds, a special sinking fund tax, a school
tax, a wharfage tax, a tax upon merchants to pay police and
firemen, a tax to pay interest upon bonds issued to certain
railroads, and a tax for general purposes of government. Under the
provisions of the Act of March 13, the defendant, Minor Meriwether,
was appointed by the governor receiver and back tax collector of
that city. He accepted the appointment and proceeded at once to the
performance of his duties.
The day previous to the passage of the act repealing the charter
of Memphis, and probably in anticipation of the contemplated
legislation of the state, Robert Garrett and others, creditors of
the corporation, filed a bill against the city, alleging
Page 102 U. S. 507
in substance that the city owed them over $100,000, upon much of
which they had recovered judgments and obtained writs of mandamus
to compel the levy of taxes for their payment; that various writs
of mandamus had been issued against the city for over $850,000;
that through the malfeasance and incompetency of its officials,
only about three-fifths of the taxes imposed had been collected,
and that this practice had run through a series of years, resulting
in delinquent taxes of about $2,500,000; that the taxes levied,
pursuant to the writs of mandamus issued, constituted a trust fund
which could only be used for the same, and, although requested to
press the collection, had neglected to do so, and that this neglect
was a fraud on the complainants relievable in a court of
equity.
It also set up that the legislature, by an act of the 19th of
March, 1877, had authorized the chancery court of the state to
appoint a receiver to take charge of the affairs of the city, upon
application of creditors owning demands against her exceeding
$100,000, when it was made to appear that writs of mandamus had
been issued against her to enforce debts against the city amounting
to over $850,000, and averring that the court had jurisdiction,
both upon general principles of jurisprudence and by authority of
that act, the bill prayed the appointment of a receiver to take
charge of the assets of the city, including its tax books and bills
for unpaid taxes, and to collect the taxes levied, for the purpose
of paying the judgments.
After the repealing act was passed, the complainants filed a
supplementary bill setting up the passage of the act, alleging its
invalidity and repeating its prayer for the appointment of a
receiver.
Subsequently several other parties instituted like suits against
the city. All the suits were, in February, 1879, consolidated into
one without objection, and by amendment to it, in April following,
Meriwether, the receiver appointed by the governor, was made a
defendant, as also sundry parties upon whose property taxes had
been levied. With the consolidation, a receiver of the assets and
property of the city was appointed
Page 102 U. S. 508
to hold and dispose of the same under the direction of the
court, and he immediately qualified and proceeded to take
possession, so far as practicable, of the property and assets and
to exercise the powers with which he was invested.
To the bill as consolidated and amended a demurrer was
interposed by the defendants, upon which several questions arose on
which the judges of the Circuit Court were divided in opinion. The
prevailing opinion of the presiding judge being against the
demurrer, it was overruled, and the defendants electing to stand
upon it, judgment final was rendered in favor of the complainants,
from which the defendants have appealed to this Court.
The receiver appointed by the court was invested with larger
powers than probably any officer of a court was ever before
entrusted with. He was required to demand, receive, and take
possession of all the assets and property of the City of Memphis,
including real and personal property, and debts due to it and taxes
which had been previously levied, except the taxes appearing on the
tax books for the year 1878, for which special provision was made,
and except also the public highways of the city, the public
squares, the public landings and wharves, the hospital, and certain
property used in connection with it, and property of the fire,
engineer, and police departments, and the taxes levied for the
support of the public schools, which excepted articles he was not
to take possession of or interfere with until the further order of
the court. It does not appear that the court entertained any doubt
that it could at some future time place all this public property in
the hands of its receiver, as its subsequent decree shows. The
receiver was also required to take possession of all the tax books
of the city on which unpaid taxes were charged, except the tax
books for the year 1878, and also all the safes, books, papers,
desks, office furniture, and other property belonging to the
offices of mayor, comptroller, register, treasurer, tax collector,
inspector, and city attorney, necessary to the discharge of his
duties as receiver, and of the buildings in which the general
council of the city had previously assembled, and the property in
and belonging to such buildings not previously excepted, and keep
them subject to the order of the court, and parties
Page 102 U. S. 509
having possession or control of such property or any part of it
were required to surrender the same to him on demand.
By the order appointing the receiver, the trustee of Shelby
County, within which the City of Memphis is situated, was required
to pay over to him all the moneys he had on hand collected for
taxes levied by the city for the year 1878, except such as were
levied for the support of public schools. The former treasurer of
the city was also required, with the like exception, to turn over
to the receiver on demand all the money in his hands or on deposit
in the German National Bank, received for the city. The mayor of
the city was also to pay over to him any money, and deliver to him
any property, belonging to the city, and the papers and vouchers
necessary for the discharge of the receiver's duties; and the Clerk
of the County of Shelby was also to pay over any moneys received by
him on account of the redemption of property sold for taxes due the
city. The receiver was also required to lease the property of which
he might have possession from month to month, and to collect the
rents and hold the same subject to the order of the court, and, if
he found it necessary, he was authorized to bring actions at law or
suits in equity against parties indebted to the city or for any tax
or taxes appearing on the tax books, and to enforce any specific
liens on the property, real or personal, for the payment of such
taxes, and to employ as many clerks and assistants as he might deem
necessary, to make use of the buildings and offices in the city
hall, and of such safes, desks, tables, chairs, and other furniture
and property of the city he might need, to buy and pay for
necessary books, stationery, fuel, and lights, and whatever else
might be necessary to fit his office or offices for use to enable
him to discharge his duties, to insure any property, real or
personal, which might come into his hands, when he thought prudent
to do so, to employ one or more attorneys, if necessary, to conduct
the prosecution of defense of suits that he might find necessary to
bring or defend under the authority conferred by him. Other powers
were also vested in the receiver, but what has already been said is
enough to show the extraordinary character of those conferred and
of the duties imposed upon him. He was in fact invested
Page 102 U. S. 510
with the administration of the financial affairs of the city so
far as might be necessary for the collection of taxes and debts and
disposing of the property of the city to pay the claims of
creditors. Executive and administrative functions were invested in
him which, it has not been supposed, could adequately be performed
by the same person in any government of a city properly
conducted.
The decree adjudged that the complainants in the several suits,
and other creditors who had made themselves parties by leave of the
court, or who might thereafter make themselves parties, should
recover from the city the several debts due them respectively, the
amounts to be thereafter fixed by the court, and that all the
assets and property of the city "of every description," or so much
thereof as might be necessary for that purpose, including taxes
previously assessed and remaining unpaid and due the city, should
be applied to the payment of their debts. The decree also adjudged
that the receiver should retain possession of all the assets and
property, books, papers, and writings previously placed in his
hands to be disposed of as the court might order in the progress of
the suit, and that he proceed to collect the assets and property in
the manner directed by previous orders for the payment of the
debts. It also enjoined the defendant, Minor Meriwether, the
receiver and back tax collector appointed by the governor of the
state, from taking possession of, collecting, or attempting to
collect, suing for, or in any way interfering with, the assets and
property, books, papers, and writings in the possession of the
receiver of the court. And the decree further adjudged that all the
property within the limits of the territory of the City of Memphis
was liable and might be subjected to the payment of all the debts
of the city, and that such liability would be enforced thereafter,
from time to time, in such manner as the court might direct.
This decree is manifestly erroneous in its main provisions. It
proceeds upon the theory that the property of every description
held by the municipality at the time of its extinction, whether
held in its own right or for public uses, including also in that
designation its uncollected taxes, were chargeable with the payment
of its debts, and constituted a trust fund, of which
Page 102 U. S. 511
the circuit court would take possession and enforce the trust,
and that the private property of the inhabitants of the city was
also liable, and could be subjected by the circuit court to the
payment of its debts. In both particulars, the theory is radically
wrong.
The right of the state to repeal the charter of Memphis cannot
be questioned. Municipal corporations are mere instrumentalities of
the state for the more convenient administration of local
government. Their powers are such as the legislature may confer,
and these may be enlarged, abridged, or entirely withdrawn at its
pleasure. This is common learning, found in all adjudications on
the subject of municipal bodies and repeated by text writers. There
is no contract between the state and the public that the charter of
a city shall not be at all times subject to legislative control.
All persons who deal with such bodies are conclusively presumed to
act upon knowledge of the power of the legislature. There is no
such thing as a vested right held by any individual in the grant of
legislative power to them.
United States v. Railroad
Co., 17 Wall. 322;
Commissioners v. Lucas,
Treasurer, 93 U. S. 108;
People v. Morris, 13 Wend. (N.Y.) 325;
Philadelphia v.
Fox, 64 Pa.St. 169;
Montpelier v. East Montpelier, 29
Vt. 12; Angell & Ames, Corp. (10th ed.), sec. 31; Dill.
Mun.Corp., sec. 30; Cooley, Const.Lim. 192, 193. By the repeal, the
legislative powers previously possessed by the corporation of
Memphis reverted to the state. A portion of them the state
immediately vested in the new government of the taxing district,
with many restrictions on the creation of indebtedness. A portion
of them the state retained; it reserved to the legislature all
power of taxation. It thus provided against future claims from the
improvidence or recklessness of the new government. The power of
the state to make this change of local government is
incontrovertible. Its subsequent provision for the collection of
the taxes of the corporation levied before the repeal of its
charter and the appropriation of the proceeds to the payment of its
debts remove from the measure any imputation that it was designed
to enable the city to escape from its just liabilities.
But while the charter of a municipal corporation may be
Page 102 U. S. 512
repealed at the pleasure of the legislature, where there is no
inhibition to its action in the Constitution of the state, the
lawful contracts of the corporation, made whilst it was in
existence, may be subsequently enforced against property held by
it, in its own right, as hereafter described, at the time of the
repeal. In this respect, its position is not materially different
from that of a private individual, whose property must, upon his
decease, go to the satisfaction of his debts before those who
succeed to his rights can share in its distribution. The language
used by us in the case of
Broughton v. Pensacola on this
subject is quoted by counsel, under the impression that it tends to
sustain the position of the complainants. We there said:
"The ancient doctrine that, upon the repeal of a private
corporation, its debts were extinguished and its real property
reverted to its grantors and its personal property vested in the
state has been so far modified by modern adjudications that a court
of equity will now lay hold of the property of a dissolved
corporation and administer it for the benefit of its creditors and
stockholders. The obligation of contracts made whilst the
corporation was in existence survives its dissolution, and the
contracts may be enforced by a court of equity so far as to subject
for their satisfaction any property possessed by the corporation at
the time. In the view of equity, its property constitutes a trust
fund pledged to the payment of the debts of creditors and
stockholders, and if a municipal corporation, upon the surrender or
extinction in other ways of its charter, is possessed of any
property, a court of equity will equally take possession of it for
the benefit of the creditors of the corporation."
93 U. S. 93 U.S.
266,
93 U. S.
268.
We approve of the doctrine stated in this citation. It expresses
what we believe to be sound law. It means that whatever property a
municipal corporation holds subject to the payment of its debts
will, after its dissolution, be so administered and applied by a
court of equity. It does not undertake to determine what is to be
deemed the property of a municipal corporation which, after the
extinction of its charter, is thus applicable. In the case from
which it is taken, the bill alleged that the City of Pensacola,
upon the surrender of its
Page 102 U. S. 513
charter, did not possess any property, and, of course, the
question here raised could not have been before the Court. The
question there was as to the continuation of the city's liability
under a new organization.
What, then, is the property of a municipal corporation which,
upon its dissolution, a court of equity will lay hold of and apply
to the payment of its debts? We answer first that it is not
property held by the corporation in trust for a private charity,
for in such property the corporation possesses no interest for its
own uses; and secondly that it is not property held in trust for
the public, for of such property the corporation is the mere agent
of the state. In its streets, wharves, cemeteries, hospitals,
courthouses, and other public buildings, the corporation has no
proprietary rights distinct from the trust for the public. It holds
them for public use, and to no other use can they be appropriated
without special legislative sanction. It would be a perversion of
that trust to apply them to other uses. The courts can have nothing
to do with them unless appealed to on behalf of the public to
prevent their diversion from the public use. The dissolution of the
charter does not divest the trust so as to subject property of this
kind to a liability from which it was previously exempt. Upon the
dissolution, the property passes under the immediate control of the
state, the agency of the corporation then ceasing. 2 Dillon,
Mun.Corp., secs. 445, 446;
Schaffer v. Cadwallader, 36
Pa.St. 126;
City of Davenport v. Peoria Marine & Fire
Insurance Co., 17 Ia. 276;
Askins v. Commonwealth, 1
Duv. (Ky.) 275;
The President &c. v. City of
Indianapolis, 12 Ind. 620.
In the third place, we say that taxes previously levied, but not
collected on the dissolution of the corporation, do not constitute
its property, and in the absence of statutory authority, they
cannot be subsequently collected by a court of equity through
officers of its own appointment and applied to the payment of the
creditors of the corporation. Taxes are not debts. It was so held
by this Court in the case of
Oregon v. Lane County,
reported in 7th Wallace. Debts are obligations for the payment of
money founded upon contract, express or implied. Taxes are imposts
levied for the support of the government
Page 102 U. S. 514
or for some special purpose authorized by it. The consent of the
taxpayer is not necessary to their enforcement. They operate
in
invitum. Nor is their nature affected by the fact that in some
states -- and we believe in Tennessee -- an action of debt may be
instituted for their recovery. The form of procedure cannot change
their character.
City of Augusta v. North, 57 Me. 392;
City of Camden v. Allen, 2 Dutch. (N.J.) 398;
Perry v.
Washburn, 20 Cal. 318. Nor are they different when levied
under writs of mandamus for the payment of judgments, and when
levied for the same purpose by statute. The levy in the one case is
as much by legislative authority as in the other. The writs of
mandamus only require the officers of assessment and collection to
obey existing law. In neither case are the taxes liens upon
property unless made so by statute.
Philadelphia v.
Greble, 38 Pa.St. 339;
Howell v. Philadelphia,
id. 471; 2 Dillon, Mun.Corp., sec. 659. Levied only by
authority of the legislature, they can be altered, postponed, or
released at its pleasure. A repeal of the law under which a tax is
levied at any time before the tax is collected generally puts an
end to the tax unless provision for its continuance is made in the
repealing act, though the tax may be revived and enforced by
subsequent legislation. We say generally, for there are some
exceptions, where the tax provided is so connected with a contract,
as the inducement for its execution, that the courts will hold the
repeal of the law to be invalid as impairing the obligation of the
contract. It is not of such taxes, constituting the consideration
of contracts, that we are speaking, but of ordinary taxes
authorized for the support of government or to meet some special
expenditure, and these, until collected -- being mere imposts of
the government, created and continuing only by the will of the
legislature -- have none of the elements of property which can be
seized like debts by attachment or other judicial process and
subjected to the payment of creditors of the dissolved corporation.
They are in no proper sense of the term assets of the corporation.
They are only the means provided for obtaining funds to support its
government and pay its debts, and disappear as such means with the
revocation of the charter, except as the legislature may otherwise
provide. When they are collected, the moneys
Page 102 U. S. 515
in the hands of the collecting officer may be controlled by the
process of the courts and applied by their direction to the uses
for which the taxes were levied, but until then there is nothing in
existence but a law of the state imposing certain charges upon
persons or property, which the legislature may change, postpone, or
release at any time before they are enforced. So long as the law
authorizing the tax continues in force, the courts may by mandamus
compel the officers empowered to levy it or charged with its
collection, if unmindful and neglectful in the matter, to proceed
and perform their duty; but when the law is gone and the office of
the collector abolished, there is nothing upon which the courts can
act. The courts cannot continue in force the taxes levied nor levy
new taxes for the payment of the debts of the corporation. The
levying of taxes is not a judicial act. It has no elements of one.
It is a high act of sovereignty, to be performed only by the
legislature upon considerations of policy, necessity, and the
public welfare. In the distribution of the powers of government in
this country into three departments, the power of taxation falls to
the legislative. It belongs to that department to determine what
measures shall be taken for the public welfare and to provide the
revenues for the support and due administration of the government
throughout the state and in all its subdivisions. Having the sole
power to authorize the tax, it must equally possess the sole power
to prescribe the means by which the tax shall be collected and to
designate the officers through whom its will shall be enforced.
It is the province of the courts to decide causes between
parties, and in so doing to construe the Constitution and the
statutes of the United States and of the several states and to
declare the law, and, when their judgments are rendered, to enforce
them by such remedies as legislation has prescribed or as are
allowed by the established practice. When they go beyond this, they
go outside of their legitimate domain and encroach upon the other
departments of the government, and all will admit that a strict
confinement of each department within its own proper sphere was
designed by the founders of our government and is essential to its
successful administration.
Page 102 U. S. 516
This doctrine is not new in this Court. It has been repeatedly
asserted, after the most mature consideration. It was asserted in
Ress v. City of Watertown. There, the plaintiff, being the
owner of certain bonds issued by the City of Watertown, in
Wisconsin, to a railroad company, brought suit upon them in the
circuit court of the United States and recovered two judgments
amounting to about $10,000. Upon these judgments he issued
executions, which were returned unsatisfied. He then applied to the
circuit court and obtained a writ of mandamus upon the authorities
of Watertown to levy and collect a tax upon the taxable property of
the city to pay the judgments; but before the writs could be
served, a majority of the members of the council resigned their
offices. Subsequent writs of mandamus obtained by him proved
ineffectual by reason of similar resignations. He then filed a bill
alleging that the corporate authorities were trustees for the
benefit of the creditors of the city, that the property of the
citizens was a trust fund for the payment of its debts, and that it
was the duty of the court to lay hold of such property and cause it
to be applied, and he prayed that the court would subject the
taxable property of the city to the payment of the judgments. To
this bill the city made answer, and on the argument of the case,
among other points, the question arose whether it was competent for
the court, on the failure of the officers of the city to levy the
tax as required by law, to appoint the marshal of the court to levy
and collect the tax to pay the judgments. Upon this question, the
judges being divided, the point was certified to this Court. In
disposing of it, we said:
"We are of the opinion that this Court has not the power to
direct a tax to be levied for the payment of these judgments. This
power to impose burdens and raise money is the highest attribute of
sovereignty, and is exercised first to raise money for public
purposes only, and second by the power of legislative authority
only. It is a power that has not been extended to the judiciary.
Especially is it beyond the power of the federal judiciary to
assume the place of a state in the exercise of this authority at
once so delicate and so important."
86 U. S. 19 Wall.
107,
86 U. S.
116.
In the case of
Heine v. The Levee Commissioners of New
Orleans, the question again arose whether it was competent
Page 102 U. S. 517
for the circuit court of the United States to direct its
officers to levy and collect a tax to pay the claims of the
plaintiffs, who were holders of bonds issued by the commissioners,
and the answer was equally emphatic both in the circuit court and
in this Court.
In the circuit court, over which Mr. Justice Bradley then
presided, the possession of the power of taxation had been denied.
"The judicial department," said the Justice,
"has no power over the subject. If the officers who are charged
with the duty of laying or collecting taxes refuse to perform their
functions, the court, in a clear case of failure and at the
instance of a party directly interested, can, by the prerogative
writ of mandamus, compel them to perform acts which are
ministerial, as distinguished from those which are judicial or
discretionary. This is all that the judicial department can do on
the subject unless the legislature has expressly conferred upon it
further powers."
1 Woods 247.
And when the case came before this Court, we here said, MR.
JUSTICE MILLER delivering the opinion:
"The power we are here asked to exercise is the very delicate
one of taxation. This power belongs, in this country, to the
legislative sovereignty, state or national. In the case before us,
the national sovereignty has nothing to do with it. The power must
be derived from the legislature of the state. So far as the present
case is concerned, the state has delegated the power to the levee
commissioners. If that body has ceased to exist, the remedy is in
the legislature either to assess the tax by special statute or to
vest the power in some other tribunal. It certainly is not vested,
as in the exercise of an original jurisdiction, in any federal
court. It is unreasonable to suppose that the legislature would
ever select a federal court for that purpose. It is not only not
one of the inherent powers of the court to levy and collect taxes,
but it is an invasion by the judiciary of the federal government of
the legislative functions of the state government. It is a most
extraordinary request, and a compliance with it would involve
consequences no less out of the way of judicial procedure, the end
of which no wisdom can foresee."
19 Wall.
86 U. S. 655.
These authorities -- and many others to the same purport
Page 102 U. S. 518
might be cited -- are sufficient to support what we have said,
that the power to levy taxes is one which belongs exclusively to
the legislative department, and from that it necessarily follows
that the regulation and control of all the agencies by which taxes
are collected must belong to it.
When creditors are unable to obtain payment of their judgments
against municipal bodies by execution, they can proceed by mandamus
against the municipal authorities to compel them to levy the
necessary tax for that purpose, if such authorities are clothed by
the legislature with the taxing power, and such tax, when
collected, cannot be diverted to other uses; but if those
authorities possess no such power or their offices have been
abolished and the power withdrawn, the remedy of the creditors is
by an appeal to the legislature, which alone can give them relief.
No federal court, either on its law or equity side, has any
inherent jurisdiction to lay a tax for any purpose or to enforce a
tax already levied, except through the agencies provided by law.
However urgent the appeal of creditors and the apparent
hopelessness of their position without the aid of the federal
court, it cannot seize the power which belongs to the legislative
department of the state and wield it in their behalf.
To return to the question propounded: what is the property of a
municipal corporation which, on its dissolution, the courts can
reach and apply to the payment of its debts?
We answer it is the private property of the corporation -- that
is, such as it held in its own right for profit or as a source of
revenue, not charged with any public trust or use, and funds in its
possession unappropriated to any specific purpose. In this respect,
the position of the extinct corporation is not dissimilar to that
of a deceased individual; it is only such property as is possessed,
freed from any trust, general or special, which can go in
liquidation of debts.
The decree of the circuit court proceeding upon a different
theory of its control over the uncollected taxes of the repealed
corporation, and of the property which could be applied to the
payment of its debts, cannot be maintained.
On another ground also the decree is equally untenable. It
adjudges that "all the property within the limits of the
Page 102 U. S. 519
territory of the City of Memphis is liable, and may be subjected
to the payment of all the debts" for which the suits are brought,
and that "such liability shall be enforced thereafter, from time to
time, in such manner" as the court may direct.
In so state of the Union outside of New England does the
doctrine obtain that the private property of individuals within the
limits of a municipal corporation can be reached by its creditors
and subjected to the payment of their demands. In Massachusetts and
Connecticut, and perhaps in other states in New England, the
individual liability of the inhabitants of towns, parishes, and
cities, for the debts of the latter is maintained, and executions
upon judgments issued against them can be enforced against the
private property of the inhabitants. But this doctrine is admitted
by the courts of those states to be peculiar to their jurisprudence
and an exception to the rule elsewhere prevailing. Elsewhere, the
private property of the inhabitants of a municipal body cannot be
subjected to the payment of its debts except by way of taxation,
but taxes, as we have already said, can only be levied by
legislative authority. The power of taxation is not one of the
functions of the judiciary, and whatever authority the states may,
under their constitutions, confer upon special tribunals of their
own, the federal courts cannot by reason of it take any additional
powers which are not judicial.
In
Rees v. City of Watertown, from which we have
already quoted, the power asserted by the decree was claimed by
counsel, but was rejected by the court. "Assume," said the
Court,
"that the plaintiff is entitled to the payment of his judgment,
and that the defendant neglects its duty in refusing to raise the
amount by taxation, it does not follow that this Court may order
the amount to be made from the private estate of one of its
citizens. This summary proceeding would involve a violation of the
rights of the latter. He has never been heard in court. He has had
no opportunity to establish a defense to the debt itself or, if the
judgment is valid, to show that his property is not liable to its
payment. It is well settled that legislative exemptions from
taxation are valid, that such exemptions may be perpetual in their
duration, and that they are in some cases beyond legislative
interference. The proceeding
Page 102 U. S. 520
supposed would violate the fundamental principle contained in
chapter twenty ninth of Magna Charta, and embodied in the
Constitution of the United States, that no man shall be deprived of
his property without due process of law -- that is, he must be
served with notice of the proceeding, and have a day in court to
make his defense."
19 Wall.
86 U. S.
122.
It is pressed upon us with great earnestness by counsel, that
unless the federal courts come to the aid of the creditors of
Memphis, and enforce, through their own officers, the taxes levied
before the repeal of its charter, they will be remediless. But the
conclusion does not follow. The taxes levied pursuant to writs of
mandamus issued by the circuit court are still to be collected, the
agency only for their collection being changed. The receiver
appointed by the governor has taken the place of the collecting
officers of the city. The funds received by him upon the special
taxes thus levied cannot be appropriated to any other uses. The
receiver, and any other agent of the state for the collection, can
be compelled by the court, equally as the former collecting
officers of the city, to proceed with the collection of such taxes
by the sale of property or by suit, or in any other way authorized
by law, and to apply the proceeds upon the judgments. If relief is
not thus afforded to the creditors, they must appeal to the
legislature. We cannot presume that the appeal will be in vain. We
cannot say that on a proper representation they will not receive
favorable action.
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.
The federal judiciary has never failed, so far as it was in its
power, to compel the performance of all lawful contracts, whether
of the individual, or of the municipality, or of the state. It has
unhesitatingly brushed aside all legislation of the state impairing
their obligation. When a tax has been authorized by law to meet
them, it has compelled the officers of assessment
Page 102 U. S. 521
to proceed and levy the tax, and the officers of collection to
proceed and collect it, and apply the proceeds. In some instances,
where the tax was the inducement and consideration of the contract,
all attempts at its repeal have been held invalid. But this has
been the limit of its power. It cannot make laws when the state
refuses to pass them. It is itself but the servant of the law. If
the state will not levy a tax, or provide for one, the federal
judiciary cannot assume the legislative power of the state and
proceed to levy the tax. If the state has provided incompetent
officers of collection, the federal judiciary cannot remove them
and put others more competent in their place. If the state appoints
no officers of collection, the federal judiciary cannot assume to
itself that duty. It cannot take upon itself to supply the defects
and omissions of state legislation. It would ill perform the duties
assigned to it by assuming power properly belonging to the
legislative department of the state.
MR. JUSTICE STRONG, with whom concurred MR. JUSTICE SWAYNE and
MR. JUSTICE HARLAN, dissenting.
The several bills of the complainants were consolidated in the
circuit court, and, so far as it appears, without objection. They
are, therefore, to be considered as one case. The important facts
averred in the bills and confessed by the demurrer are the
following:
The complainants are creditors of the City of Memphis. For a
part of their claims they had recovered judgments against the city
before the bills were filed, and had obtained writs of mandamus to
enforce the levy of taxes to satisfy the judgments. In obedience to
these writs the proper city authorities had levied the taxes
required, but had neglected to collect them, in large measure, and,
even when a portion of the taxes had been collected, had failed to
appropriate the money collected to the payment of the judgments for
which it had been specially levied, and to which alone it could be
lawfully applied. Some of the money thus collected remained on
deposit. These levies were made during the years 1875, 1876, 1877,
and 1878, the city ordinances by which they were ordered specifying
the amounts and the parties for whom the
Page 102 U. S. 522
taxes were levied. The complainants were also large general
creditors of the city, holding its obligations, upon which no
judgments had been recovered.
Besides the special levies, made as above stated, the city
authorities had made others for the purpose of paying interest on
the city debt and for general uses. These taxes also remained
uncollected. Meanwhile the city had nothing liable to execution at
law, and no property except what it held for public uses (in
distinction from private), such as public municipal buildings,
parks, streets, fire apparatus, &c. It was insolvent.
Such was the situation when these bills were filed. Their object
was to obtain the appointment of a receiver to take possession of
the assets of the city (including the collected but not
appropriated taxes, as well as the claims and bills for past due
and uncollected taxes), and to collect the same with a view to
their being applied according to equity and legal right.
The principal one of the consolidated bills was filed on the
twenty eighth day of January, 1879, by Garrett
et al.
Almost immediately after it was filed -- the next day, indeed -- an
act of the legislature of the state was passed, approved Jan. 31,
1879, by which the charter of the city was repealed, all power of
taxation in any form was withdrawn from its authorities, and all
persons holding office under the repealed acts, which constituted
the charter and endowed it with power, were prohibited from
attempting to exercise any of the functions of their offices. The
public buildings, squares, promenades, wharves, streets, alleys,
parks, fire engines, hose and carriages, engineer instruments, and
all other property, real and personal, theretofore used for
municipal purposes, were declared to be transferred to the control
and custody of the state, to remain public property, as it always
had been, for the uses to which it had theretofore been applied.
The act contained no reservation of the rights of creditors, and
said nothing of any outstanding taxes which had been levied but not
collected, and it was declared to take effect from and after its
passage.
On the same day, Jan. 29, 1879, another act of the legislature
was passed, approved Jan. 31, 1879, by which the identical
territory that had been embraced in the territorial
Page 102 U. S. 523
limits of the City of Memphis was erected into what the act
calls a "taxing district." The act declared that the necessary
taxes for the support of the government thus established should be
imposed directly by the General Assembly of the state and not
otherwise. It established a board of fire and police commissioners,
a committee on ordinances, or local laws, to be known as the
legislative council, consisting of the commissioners of the fire
and police boards and the supervisors of the board of public works.
It established also a board of health, and a board of public works.
It prohibited the commissioners from issuing any evidences of
indebtedness, and declared that no property, real or personal, held
by them for public use, should ever be subject to execution, or
attachment, or seizure under any legal process for any debt created
by said commissioners, and that all taxes due, or moneys in the
hands of the county trustee, or on deposit, should be exempt from
seizure under attachment, execution, garnishment, or other legal
process. The act also declared that neither the commissioners, nor
the trustee, nor the new government created by the act, should pay
or be liable for any debt created by the extinct corporation
(
i.e. the City of Memphis), and that none of the taxes
collected under the act should ever be used for the payment of any
of the said debts. The act was declared to take effect from its
passage. Its fourteenth section, as subsequently amended, declared
that all the property of the city mentioned as transferred to the
state by the act first mentioned should be thereby transferred to
the custody and control of the board of commissioners of the taxing
district, and that all indebtedness for taxes, or otherwise,
whether in litigation or not, due the municipality, namely, the
city, should vest in and become the property of the state, to be
disposed of as should thereafter be provided by law.
These two acts were passed, as has been noticed, on the 29th of
January, 1879, and approved two days thereafter.
On the 7th of February, 1879, the complainants, Garrett
et
al., filed, by leave of the court, an amended and supplemental
bill, averring what had been charged in the original, and setting
forth,
inter alia, these acts of the legislature, denying
their constitutionality, and praying, as in the original bill,
for
Page 102 U. S. 524
the appointment of a receiver, and praying also that the bill
might be taken as a general creditors' bill for all creditors who
might come in within a limited time and prove their claims.
The other bills were filed severally on Jan. 30, 1879, Feb. 3,
8, and 10, next following, and on the 12th of February the cases
were consolidated, and T. J. Latham was appointed a receiver in
accordance with the prayer of the complainants. He gave the
required bond on the same day, and took immediate possession of the
tax books, bills, &c., of the city.
Subsequently, on the 13th of March, 1879, the legislature of the
state passed another act, the first section whereof directed the
governor to appoint an officer for municipal corporations whose
charters had been repealed (the City of Memphis being the only
one), to be known as a receiver and back tax collector. Subsequent
sections required such receiver and collector to take possession of
all books, papers, and documents pertaining to the assessment and
collection of the taxes embraced by the act; namely, the taxes due
at the time of the repeal of the charter. It further directed that
the receiver should file in the chancery court of the state an
original creditors' bill, in the name of the state, on behalf of
all the creditors, against all the delinquent taxpayers; and it
provided that taxes assessed prior to 1875 might be settled in the
valid indebtedness of the extinct municipality, to-wit, in valid
bonds, whether due or not, due coupons, and any other valid debts
of such municipality, with accrued interest, whether in the shape
of scrip, warrants, judgments, ledger balances, paving
certificates, or receipts for money paid by taxpayers to paving
contractors. It directed the receiver and back tax collector to
receive such evidences of debt at the following rates, namely,
compromise bonds, at their face value; all other indebtedness at
fifty cents on the dollar, except judgments, which should be
received at fifty five percent of their face value.
The act also directed that the receiver should receive in
payment of taxes levied after 1874 the indebtedness of the
municipality, when there was no lien or equity requiring payment
thereof in current money. It also prohibited the collector or
receiver from coercing payment of a greater sum than
Page 102 U. S. 525
one fifth of the taxes in arrear annually, so as to distribute
the whole through five equal annual installments, commencing from
his appointment and qualification -- and it remitted all costs of
condemnation, penalties, and charges -- provided, however, that
nothing therein contained was intended to interfere with any vested
rights entitling the party having such right to a speedy
collection.
Under the provisions of this act, Minor Meriwether, the
principal appellant, was appointed receiver and back tax collector
by the governor of the state. He accepted the appointment, and
proceeded to demand the payment to him of the taxes in arrears,
interfering with the receiver previously appointed by the circuit
court, and impeding that receiver in the discharge of his duties.
The complainants then filed a supplemental bill, making Meriwether
a party defendant, together with some defaulting taxpayers, and
praying, among other things, for an injunction against such
interference.
To the consolidated bill thus amended and supplemented a general
demurrer was filed, which was not sustained by the circuit court,
and, the defendants electing to stand upon it, a final decree was
entered in favor of the complainants. From that decree this appeal
has been taken.
Whatever may be said of the equities of the complainants and of
their power to enforce those rights in a court of equity, I agree
that the decree as entered was too broad. It declared and adjudged
that all the assets and property of every description theretofore
belonging to the City of Memphis, or so much thereof as may be
necessary for the purpose, including taxes theretofore assessed and
remaining unpaid and due the city, should be applied to the payment
of the debts due to the complainants and other creditors who had
made, or might thereafter make, themselves parties to the suit.
This included not only the private property of the city, but also
that which it had held for public uses; namely, for governmental
purposes and as a trustee for the state, such as the public
buildings, streets, squares, parks, school houses, promenades, fire
engines, hose and hose carriages, engine houses, engineer
instruments, and generally everything held by the city for merely
municipal purposes. To this extent, I think, the decree cannot be
sustained.
Page 102 U. S. 526
Such property cannot be subjected to the payment of the debts of
the corporation. Its public character forbids such an
appropriation. It could not be subjected to taxation at the
instance of the municipality. It was never held for the payment of
debts. Instead thereof, it was held by the city merely as a trustee
for the public. It would not be contended that it could have been
taken in execution at law, and for the same reason it cannot be
reached in equity to satisfy creditors.
I think also that part of the decree which adjudges that all the
property within the limits of the territory of the City of Memphis
is liable and may be subjected to the payment of all the debts
owing by the city, and that such liability shall be enforced
hereafter, from time to time, in such manner as the circuit court
might order and direct, is erroneous. Notwithstanding what has been
held in some of the New England states, I think the doctrine is
generally accepted, that the private property of individuals within
the territorial limits of a municipal corporation cannot be reached
by its creditors directly, any more than the private property of
stockholders in other corporations can be thus reached. It may, it
is true, be subjected to taxation for the payment of the corporate
debts, but the levy of taxes must be made by the corporation
itself, or by the state. It is not a judicial act, and courts of
equity, at least the circuit courts of the United States, cannot by
their own officers levy a tax.
Rees v. City of
Watertown, 19 Wall. 107.
They certainly have no power to compel the levy of a tax by a
corporation which is without officers and which has ceased to
exist.
But while, in these particulars and for these reasons, the
decree entered by the circuit court cannot be sustained in its full
extent, I am of opinion that the complainants are entitled to some
of the relief granted them by the decree. If they are not, then a
new way has been discovered to pay old debts. It cannot be that a
corporation, whether municipal or not, can be dissolved, and that
by its dissolution its property can be withdrawn from the reach of
its just creditors by any process of law or equity. No doubt there
are technical difficulties in the way of maintaining proceedings at
law against a corporation
Page 102 U. S. 527
after its charter has been repealed, but a court of equity is
competent to enforce justice to some extent, even where the
processes of law fail.
A case, I think, was made by the bill for the appointment of a
receiver to take into the possession of the court those taxes which
had been levied by judicial direction for the payment of judgments
recovered against the city -- taxes which had been only partially
collected. Those taxes were in a most legitimate sense charged with
a trust and a trust for the complainants. The fund to be raised by
the levies was set apart for a special purpose. It could be used
lawfully for no other. The ordinances which directed the levies
specified the amounts to be raised, and the judgment creditors for
whose use the levies were made. Those creditors were, therefore,
cestuis que trust in the fullest sense of the term, the
legal interest alone being in the city. The case shows that this
trust had been neglected and abused by the trustee. The taxes which
it was the duty of the city as trustee to collect had been suffered
to remain uncollected in great measure, and for an unreasonable
time, and even the portions which were collected had not been paid
over, as the writs of mandamus required. This breach of duty by the
trustee had continued from 1875 to 1879. Had the trustee been a
natural person, or a private corporation, no one would doubt the
power of a court of equity to interfere and take the trust out of
the hands of the faithless trustee, either by removing him and
appointing another trustee, or by administering the trust by its
own officers. It can make no difference that the City of Memphis
was a municipal corporation. Its character as such does not affect
the nature of its obligations to its creditors, or its cestuis que
trust, or impair the remedies they would have if the city was a
common debtor or trustee. While as a municipal corporation the city
had public duties to perform, yet in contracting debts authorized
by the law of its organization, or in performing a private trust,
it is regarded by the law as standing on the same footing as a
private individual, with the same rights and duties, and with the
same liabilities, as attend such persons. Over its public duties,
it may be admitted, the legislature has plenary authority. Over its
private obligations it has not.
Bailey v.
Page 102 U. S. 528
The Mayor &c. of the City of New York, 3 Hill
(N.Y.) 531;
Small v. The Inhabitants of Danville, 51 Me.
359;
Oliver v. Worcester, 102 Mass. 489; Dillon,
Mun.Corp., sec. 39, and cases cited in the notes.
Moreover, if, as contended by the appellants, the City of
Memphis ceased to have any legal existence on the thirty first day
of January, 1879, when the legislative act repealing the charter
was approved, the case then became one of a trust without a
trustee, pre eminently fit for equitable interference. A court of
equity will not permit a private trust to fail for want of a
trustee. And this rule is applicable to cases in which a municipal
corporation has been nominated the trustee.
Girard v.
Philadelphia, 7 Wall. 1;
Philadelphia v.
Fox, 64 Pa.St. 169;
Montpelier v. East Montpelier, 29
Vt. 12. In such cases, as in cases where a natural person or a
private corporation is the trustee, and the person has died or the
corporation has been dissolved, the court will appoint a new
trustee, or execute the trust by its own officers or agents. In
Potter on Corporations, sec. 699, it is said:
"Where in any way the legal existence of municipal trustees is
destroyed by legislative act, a court of equity will assume the
execution of the trust, and, if necessary, will appoint new
trustees to take charge of the property, and carry into effect the
trust."
In High on Receivers 304, 305, it is said:
"When creditors of a corporation have a charge upon a particular
fund, in the nature of a trust fund, the mismanagement or waste of
such fund by those entrusted with its control will warrant the
appointment of a receiver."
So in
Batesville Institute v.
Kauffman, 18 Wall. 151, this Court, when speaking
of the power of a court to appoint a new trustee in place of one
deceased, said:
"It is, however, within the power of a court of equity to decree
and enforce the execution of the trust through its own officers and
agents, without the intervention of a new trustee,"
citing Story's Equity 976-1060.
Without further citations, which might easily be made, enough
has been said to show that in the present case the circuit court
was authorized to seize by the hands of its own receiver, for
administration, those taxes which had been levied
Page 102 U. S. 529
specially for the payment of judgments recovered, in regard to
which the city had occupied the relation of a trustee, at least
practically.
Much of what I have said is equally applicable to the taxes
which the city during its corporate existence had levied for the
payment of interest on its debt, or for other purposes, and had not
collected, and generally to all the assets of the city of every
character, except such as I have heretofore mentioned, held for
strictly public uses, such as public buildings, parks, fire
apparatus, &c. These general assets, though not held specially
in trust for any particular creditors, were held by the
corporation, in a very just sense, for the benefit of its
creditors. The corporation having ceased to exist, it was perfectly
within the power of the circuit court, sitting as a court of
equity, to seize all its assets to which its creditors have an
equitable or legal claim, and hold them for administration. Such
assets cannot be appropriated to any other use until the creditors
are satisfied. Even legislative action cannot divert them to other
uses. These principles have been fully recognized, and particularly
in the code of Tennessee. Referring to dissolved corporations, that
code enacts (sec. 3426):
"The court shall appoint a receiver, with full power to take
possession of all the debts and property, and sell and dispose of,
collect and distribute, the same among the creditors and other
persons interested, under the orders of the court."
This statute is only an affirmance of equitable remedies before
acknowledged and found in textbooks. Thus, in Potter on
Corporations, secs. 714, 715, the rule is thus stated:
"Whatever technical difficulties exist in maintaining an action
at law against a corporation after its charter has been repealed,
in the apprehension of a court of equity there is no difficulty in
a creditor's following the property of the corporation into the
hands of one not a
bona fide creditor or purchaser,
asserting his lien thereon, and obtaining satisfaction of his
debt."
In
Broughton v. Pensacola, 93 U. S.
266, the language of the Court was:
"The ancient doctrine that, upon the repeal of a private
corporation, its debts were extinguished, and its real property
reverted to its grantors, and its personal property vested in the
state, has been so far modified by modern adjudications that a
court of equity will now
Page 102 U. S. 530
lay hold of the property of a dissolved corporation and
administer it for the benefit of its creditors and stockholders.
The obligation of contracts, made whilst the corporation was in
existence, survives its dissolution; and the contracts may be
enforced by a court of equity, so far as to subject, for their
satisfaction, any property possessed by the corporation at the
time. In the view of equity, its property constitutes a trust fund
pledged to the payment of the debts of creditors and stockholders;
and if a municipal corporation, upon the surrender or extinction in
other ways of its charter, is possessed of any property, a court of
equity will equally take possession of it for the benefit of the
creditors of the corporation."
So in
Curran v.
Arkansas, 15 How. 307, it was said, "The assets of
a corporation are assets for the payment of its debts, and are
trust funds for that purpose."
See also Maenhout v. New
Orleans, 2 Woods 108 114.
In Dillon on Municipal Corporations, sec. 37, the rule is stated
thus:
"Where the legal existence of a municipal trustee is destroyed
by legislative act, a court of chancery will assume the execution
of the trust, . . . take charge of the property, and carry into
effect the trust."
In
Beckwith v. Racine, 7 Biss. 142, the court said:
"Where a contract cannot be enforced at law against a municipal
corporation owing to a repeal of its charter, and there are any
funds, a court of equity will administer them for the benefit of
creditors."
It is hardly necessary to say that the private property of a
municipal corporation is so decidedly stamped with a trust in favor
of its creditors, that it is incapable of being diverted to other
uses by the legislation of the state. This law has again and again
been declared.
Grogan v. San Francisco, 18 Cal. 590, by
Field, J.;
Board of Park Commissioners v. Common Council of
Detroit, 28 Mich. 228;
City of Dubuque v. Ill. Cent.
Railroad Co., 67, 68.
The citations I have made (many others might be added) are
sufficient to maintain the jurisdiction of the circuit court in
this case, and its power to lay hold, by its receiver, of all the
property and assets belonging to the City of Memphis, when its
charter was repealed, including all taxes levied and
Page 102 U. S. 531
collected but undisposed of, and all taxes uncollected, all
property purchased by the city in sales for taxes, and all assets
of every description, except the property above mentioned held for
strictly public uses, and also to administer such assets for the
benefit of the creditors.
I do not contend that a court of equity can itself levy a tax. I
agree it cannot, and so this Court has decided.
Rees v.
City of Watertown, 19 Wall. 107. The argument which
has been submitted to prove that the circuit court has no such
power is quite unnecessary. It is inapplicable to the case we have
in hand. The complainants' bill asked for no assessment or levy of
a tax, and the circuit court decreed none. The levy of a tax is a
very distinct thing from the collection of a tax already levied.
The levy is generally a legislative or a
quasi-judicial
act. The collection of a tax after it has been levied is a
ministerial act, which a court has power to enforce.
I have said, and I earnestly maintain, that the taxes which the
City of Memphis had levied before the repeal of its charter, some
of which were collected, but remained on deposit or undisposed of,
and some of which are not collected, are assets of the corporation,
which its creditors have an equitable right to have seized and
appropriated to the payment of the corporate debts. By the lawful
assessment and levy of a tax the taxpayer becomes a debtor to the
municipality, and the debt may be recovered, like other debts, by a
suit at law; or, when it is a lien, by a bill of equity. Such
certainly is the law of Tennessee.
Mayor & Aldermen of
Jonesboro v. McKee, 2 Yerg. (Tenn.) 167;
Rutledge v.
Fogg, 3 Coldw. (Tenn.) 554;
Marr v. The Bank of West
Tennessee, 4
id. 487. The imposition of a tax,
creates a legal obligation to pay. In
Savings
Bank v. United States, 19 Wall. 227, this Court
ruled that, independently of an act of Congress authorizing them,
suits at law may be maintained by the United States to recover
taxes assessed and levied. The statutes of Tennessee leave the
matter in no doubt, so far as it relates to the rule in that state.
And in the Civil Code, secs. 554, 555, it is enacted that assessed
taxes shall be and remain liens upon all taxable property of the
person against whom they are assessed. If they are liens, they are
enforceable in equity.
Page 102 U. S. 532
It is passing strange if those claims, which, by the law of the
state, are debts due to the city and collectible as such by the
ordinary processes of law, are not assets of the corporation for
the payment of its debts. And if they can be collected in the state
courts, I am unable to see why the circuit court of the United
States, sitting in Tennessee, and having jurisdiction, may not also
collect them, or seize them as assets of an insolvent and dissolved
corporation. I cannot perceive why they are not as truly assets of
the city as are the assessments made by an insolvent mutual
insurance company its assets. Nobody would deny that such
assessments could be seized by a court of equity, through the
agency of its receiver, and administered for the benefit of the
creditors of the company. No difficulty would be found in the way
of collecting them.
Thus far I have considered the merits of the case as unaffected
by the legislation of the state, heretofore spoken of, except so
far as that legislation repealed the charter of the city. That
legislation was certainly very extraordinary, and quite
unprecedented in the history of the country since the federal
Constitution was adopted. Whatever may have been its purpose, and
however carefully that purpose may have been disguised, if it can
be sustained, its effect is to obstruct, if not totally destroy,
all the power of the creditors of the city to enforce payment of
the debts due them. They are remanded to the mere grace and favor
of the legislature. If ever legislation impaired the obligation of
contracts, this did. If it had been simply the repeal of the
municipal charter, no one could have called it in question.
Undoubtedly the legislature of a state may amend or dissolve the
organization of a municipal corporation, so far as its governmental
powers are concerned. But no legislature can so dissolve a
corporation, municipal or private, as to destroy or impair the
obligation of any contracts the corporation may have made. Dillon,
Mun.Corp., sec. 114;
Von Hoffman v. City of
Quincy, 4 Wall. 535. Creditors of municipal
corporations are as completely within the protection of the
Constitution as any other creditors. What is meant by "impairing
the obligation of a contract" is well defined. Embarrassments
thrown by a statute in the way of enforcing payment of a debt, or a
statutory substitution for the obligation and liability
Page 102 U. S. 533
of the debtor, of the will of some other person, though that
person be a state, have not heretofore been recognized as
consistent with the Constitution. The protection afforded by its
provisions and its prohibition of certain state legislation relate,
not to the mode and form of state statutes, but to their operation
or effect.
In the view I take of the case, however, it is unnecessary to
decide how far the legislation of the state is constitutional, or
how far it is in conflict, if at all, with the paramount law which
controls alike state and natural persons. Certainly the appointment
by the governor of Meriwether as a receiver and back tax collector
can have no effect upon the prior appointment of Latham by the
circuit court. It cannot confer upon Meriwether any right to
interfere with the performance of the duties which the court had
imposed upon its receiver. The jurisdiction of the circuit court
had fully attached, and, by the action of its receiver, the assets
of the city, the tax bills and books, had come into the possession
of the court before Meriwether's appointment. That jurisdiction and
possession cannot be divested by any state action. The injunction
decreed against Meriwether was, therefore, I think, properly
adjudged.
I have thus stated, as briefly as possible, my reasons for
dissenting from the action of the majority of the court, reversing
the decree of the court below and ordering a dismissal of the
complainants' bill.
I think the decree should be modified by striking out so much of
it as subjects to the payment of the debts of the city the property
held exclusively for public uses, and so much as subjects to such
payment the private property of all persons within the city's
territorial limits.
Thus modified, I think the decree should be affirmed.
