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BOARD OF LIQUIDATION OF THE CITY OF NEW ORLEANS v. UNITED STATES ex rel. HART.

April 19, 1886

BOARD OF LIQUIDATION OF THE CITY OF NEW ORLEANS
v.
UNITED STATES EX REL. HART.



The facts, as stated in the petition and found by the court, are briefly as follows: On the third of March, 1882, the relator recovered judgment in the circuit court of the United States against the city for $121,697.18, which drew interest from its date at the rate of 5 per cent. per annum. This judgment was founded on contracts for municipal purposes made from 1871 to 1877, inclusive. To review it the city sued out a writ of error from this court, but, as it did not operate as a supersedeas, the relator caused a writ of fleri facias to be issued, and levied upon certain moneys due and to become due to the city by the Canal & Claiborne Street Railroad Company and by the Orleans Railroad Company, and also upon the interest of the city in the New Orleans Sugar Shed Company and in the Orleans Sugar Sheds. Proceedings were taken to contest these seizures, but judgment was rendered in his favor, to review which the city sued out a writ of error together with a supersedeas. While these cases were pending in this court, the relator and the city entered into a compromise, by which it was agreed, among other things, that she should dismiss the writs of error, and that he should renounce his seizure of the sugar sheds, apply the bonus due and to become due by the railway companies to the payment of his judgment, and fund the balance under the provisions of the act known as No. 67 of the legislature of the state of 1884. Under the writ various sums were collected, which, on the eighth of July, 1885, had reduced the judgment to $76,194.62. The relator complied with the terms of the compromise on his part, and called upon the board to prepare and deliver to him bonds, under the provisions of act No. 67 of 1884, for the balance due on his judgment; but the board refused to comply with the demand. The petition alleged that the city made no objection to the performance of this duty by the board, but that the board refused on its own account. The relator, therefore, prayed for an alternative writ of mandamus commanding the board to prepare and issue the bonds of the city, pursuant to act 67 of 1884, to the amount and value of the balance due on his judgment, and deliver them to him, and that the board be cited to answer his demand, and that upon the hearing the writ be made peremptory. The board appeared and answered the petition, setting up that all the property of the city not dedicated to public use, and also the surplus of what was known as the 'Premium Bond Tax,' were pledged, under act No. 58 of 1882, and by previous legislation, to the payment of other bonds of the city which were outstanding; and that the act of 1884, in so far as it directs a diversion of that property and fund, impairs the contract with the holders of those bonds, and is therefore unconstitutional and void. By consent of parties, the Sun Mutual Insurance Company, as the holder of such outstanding bonds, intervened and joined with the board in asserting the unconstitutionality of act 67 of 1884. The court granted a peremptory mandamus as prayed, and to review that judgment the case was brought here.

The opinion of the court was delivered by: Mr. Justice Field delivered the opinion of the court.

Henry C. Miller, for Board of Liquidation.

Edgar H. Farrar, for United States ex rel. Hart.

This was a petition in the name of the United States, on the relation of Judah Hart, a citizen of New York, for a mandamus to the Board of Liquidation of the city of New Orleans -- a corporation organized under the laws of the State and having charge of the financial affairs of the city -- to prepare and issue to him bonds of the city for the amount of his demand. The facts, as stated in the petition and found by the court, are briefly as follows: On the 3d of March, 1882, the relator recovered judgment in the Circuit Court of the United States against the city for $121,697.18, which drew interest from its date at the rate of five per cent. per annum. This judgment was founded on contracts for municipal purposes made from 1871 to 1877, inclusive. To review it the city sued out a writ of error from this court, but, as it did not operate as a supersedeas, the relator caused a writ of fieri facias to be issued, and levied upon certain moneys due and to become due to the city by the Canal and Claiborne Street Railroad Company and by the Orleans Railroad Company, and also upon the interest of the city in the New Orleans Sugar Shed Company and in the Orleans Sugar Sheds. Proceedings were taken to contest these seizures, but judgment was rendered in his favor, to review which the city sued out a writ of error together with a supersedeas.

While these cases were pending in this court, the relator and the city entered into a compromise, by which it was agreed, among other things, that she should dismiss the writs of error, and that he should renounce his seizure of the sugar sheds, apply the bonus due and to become due by the railway companies to the payment of his judgment, and fund the balance under the provisions of the act known as No. 67 of the legislature of the State of 1884.

Under the writ various sums were collected, which, on the 8th of July, 1885, had reduced the judgment to $76,194.62. The relator complied with the terms of the compromise on his part, and called upon the board to prepare and deliver to him bonds, under the provisions of act No. 67 of 1884, for the balance due on his judgment; but the board refused to comply with the demand.

The petition alleged that the city made no objection to the performance of this duty by the board, but that the board refused on its own account. The relator, therefore, prayed for an alternative writ of mandamus commanding the board to prepare and issue the bonds of the city, pursuant to act 67 of 1884, to the amount and value of the balance due on his judgment, and deliver them to him, and that the board be cited to answer his demand, and that upon the hearing the writ be made peremptory.

The board appeared and answered the petition, setting up that all the property of the city not dedicated to public use, and also the surplus of what was known as the Premium Bond Tax, were pledged, under act No. 58 of 1882, and by previous legislation, to the payment of other bonds of the city which were outstanding, and that the act of 1884, in so far as it directs a diversion of that property and fund, impairs the contract with the holders of those bonds, and is, therefore, unconstitutional and void.

By consent of parties, the Sun Mutual Insurance Company, as the holder of such outstanding bonds, intervened and joined with the Board in asserting the unconstitutionality of act 67 of 1884. The court granted a peremptory mandamus as prayed, and to review that judgment the case was brought here.

To understand clearly the position of the board of liquidation, and appreciate the ground of its refusal to issue the bonds under act No. 67 of 1884, pursuant to the terms of the compromise, it will be necessary to refer briefly to the act of March 6, 1876, known as the 'Premium Bond Act,' out of which the surplus of the premium bond tax arises, and to the act of April 10, 1880, to liquidate the indebtedness of the city, and create the board of liquidation, as well as to the acts of 1882 and 1884.

The premium bond act was an attempt to coerce creditors of the city to accept the plan proposed by her council for the payment of her indebtedness, by withholding from them all other means of payment of their demands. The city was at the time almost in a bankrupt condition, and the sums required to meet the interest on her admitted indebtedness rendered taxation not only burdensome, but oppressive. The plan was to exchange all recognized and valid bonds of the city, and of Jefferson and Carrollton, which had become incorporated with her, for premium bonds, to be issued under the act. The latter were to be of the denomination of $20 each, to be dated September 1, 1875, and to bear interest at the rate of 5 per cent. per annum from July 15, 1875, but not payable at any designated period. That, both as to principal and interest, was to be determined by a lottery. They were to be divided into series of 100 each. A certain number of the series was to be drawn according to a prescribed schedule, and it would depend upon the number drawn whether a bond would be paid in one year or in fifty years.

The act forbade the levy of a tax for the payment of the principal or interest of any other bonds, repealed all laws requiring or authorizing the city to lay any such tax, and declared that it should be incompetent for any court to issue a mandamus to the officers of the city to levy and collect a tax for interest on other bonds. To meet the interest on the premium bonds, and provide for other municipal wants, it further declared that a tax of only 1 1/2 per cent. per annum on the assessed value of property in the city should be levied, and that this limitation of her taxing power was a contract, not only with the holder of them, but also with every resident and tax-payer, so as to authorize him to legally object to any higher rate of taxation. Under this plan premium bonds to the amount of $20,000,000 were prepared, of which a number equal to $13,263,300 was issued for other bonds. The remainder were not issued, because creditors refused to accept them. Holders of other bonds brought suits to compel the levy of a greater tax to pay them, pursuant to stipulations made or implied, at the time of their issue, that sufficient sums should be raised to meet the principal and interest on them. In those suits this court declared that the limitation upon the taxing power which the city possessed at the time the bonds were issued, and upon the faith of which they were taken, was invalid as impairing the obligation of her contract with the holders. Wolff v. New Orleans, 103 U. S. 358, and Louisiana v. Pilsbury, 105 U. S. 278.

Subsequently, the city purchased, with the proceeds of certain railroad franchises, premium bonds to the value of $3,567,360, and under the operation of the plan a large number was extinguished, so that when the petition of the relator was presented there remained outstanding of those bonds only $7,918,280. But, notwithstanding the reduction made at different times, the tax was levied annually for interest on the whole number prepared, thus creating an excess beyond the amount required.

The constitution of Louisiana, adopted in 1879, ordained that the general assembly, at its next session, should enact such legislation as might be proper to liquidate the indebtedness of the city, and to apply its assets to the satisfaction thereof. Article 254. Under this requirement, and in supposed compliance with it, the general assembly, on the tenth of April, 1880, passed the act known as No. 133 of that year, creating a board of liquidation, investing it with exclusive control of all matters relating to the bonded debt, directing it to prepare bonds to be issued for negotiation or exchange, and with them or their proceeds to retire and cancel the entire valid debt of the city, except the floating debt previously created; and requiring the city authorities to transfer to it, as soon as possible after its organization, all ...


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