text:
Webber v. Virginia/Opinion of the Court

In the county court where the accused was tried, the only defence presented by his instructions was, that he was acting as the agent of the Singer Manufacturing Company, which had a license from the State as a resident merchant in Richmond to sell the machines, and also held a patent of the United States, authorizing it to manufacture and sell them anywhere in the United States. To this defence the answer is obvious. The license, being limited to the city of Richmond, gave no authority to the company to sell the machines elsewhere, and of course gave none to its agent. Besides, the question as to the extent of the territorial operation of the license depended upon the construction given by the Court of Appeals of the State to the statute, and its decision thereon is not open to review by us. And the right conferred by the patent laws of the United States to inventors to sell their inventions and discoveries does not take the tangible property, in which the invention or discovery may be exhibited or carried into effect, from the operation of the tax and license laws of the State. The combination of different materials so as to produce a new and valuable product or result, or to produce a well-known product or result more rapidly or better than before, which constitutes the invention or discovery, cannot be forbidden by the State, nor can the sale of the article or machine produced be restricted except as the production and sale of other articles, for the manufacture of which no invention or discovery is patented or claimed, may be forbidden or restricted.

The patent for a dynamite powder does not prevent the State from prescribing the conditions of its manufacture, storage, and sale, so as to protect the community from the danger of explosion. A patent for the manufacture and sale of a deadly poison does not lessen the right of the State to control its handling and use. The legislation respecting the articles which the State may adopt after the patents have expired, it may equally adopt during their continuance. It is only the right to the invention or discovery the incorporeal right-which the State cannot interfere with. Congress never intended that the patent laws should displace the police powers of the States, meaning by that term those powers by which the health, good order, peace, and general welfare of the community are promoted. Whatever rights are secured to inventors must be enjoyed in subordination to this general authority of the State over all property within its limits.

These views find support in the language of this court in Patterson v. Kentucky, 97 U.S. 501. There a party was convicted of violating a statute of the State regulating the inspection and gauging of oils and fluids, the product of coal, petroleum, or other bituminous substances. The statute provided that such oils and fluids should be inspected by an authorized officer of the State before being used, sold, or offered for sale, and required the inspector to brand, according to the fact, casks and barrels of the oil with the words 'standard oil,' or with the words 'unsafe for illuminating purposes.' It imposed a penalty for selling or offering for sale in the State such oils and fluids as had been condemned. A particular oil, known as the Aurora oil, which had been thus condemned, was sold by the accused. A patent for the oil had been issued by the United States to a party who had assigned it to him, and in defence to the indictment he asserted the right under the patent to sell the oil in any part of the United States, and that no State could, consistently with the Federal Constitution and the laws of Congress, prevent or obstruct its exercise. But the court held this construction of the Constitution and laws to be inadmissible, and that the right was to be exercised in subordination to the general powers which the several States possessed over their purely domestic affairs, whether of internal commerce or police. After some just observations upon the police powers of the State, their extent and object, and a reference to previous decisions, the court said, speaking through Mr. Justice Harlan: 'These considerations, gathered from the former decisions of this court, would seem to justify the conclusion that the right which the patentee or his assignee possesses in the property created by the application of a patented discovery, must be enjoyed subject to the complete and salutary power, with which the States have never parted, of so defining and regulating the sale and use of property within their respective limits as to afford protection to the many against the injurious conduct of the few. The right of property in the physical substance, which is the fruit of the discovery, is altogether distinct from the right in the discovery itself, just as the property in the instruments or plates by which copies of a map are multiplied is distinct from the copyright of the map itself.' And again, the enjoyment of the right in the discovery 'may be secured and protected by national authority against all interference; but the use of the tangible property which comes into existence by the application of the discovery is not beyond the control of State legislation simply because the patentee acquires a monopoly in his discovery.'

In accordance with the views thus expressed we can find no objection to the legislation of Virginia in requiring a license for the sale of the sewing-machines, by reason of the grant of letters-patent for the invention.

There is, however, an objection to its legislation arising from its discriminating provisions against non-resident merchants and their agents, and this is presented by the instructions given to the jury at the request of the attorney of the Commonwealth.

The forty-fifth section of the revenue law declares that 'any person who shall sell or offer for sale the manufactured articles or machines of other States or Territories, unless he be the owner thereof and taxed as a merchant, or take orders therefor, on commission or otherwise, shall be deemed to be an agent' for the sale of those articles, and shall not act as such without taking out a license therefor. A violation of this provision subjects the offender to a fine of not less than fifty dollars nor more than one hundred dollars for each offence.

The forty-sixth section fixes the license tax of the agent for the sale of such articles at twenty-five dollars. The license only gives him a right to sell in the county or corporation for which it is issued. If he sells, or offers to sell, in other counties or corporations, he must pay in each an additional tax of ten dollars. The section then declares that 'all persons, other than resident manufacturers or their agents, selling articles manufactured in the State shall pay the specific license tax imposed by this section.' By these sections, read together, we have this result: the agent for the sale of articles manufactured in other States must first obtain a license to sell, for which he is required to pay a specific tax for each county in which he sells or offers to sell them; while the agent for the sale of articles manufactured in the State, if acting for the manufacturer, is not required to obtain a license or pay any license tax. Here there is a clear discrimination in favor of home manufacturers and against the manufacturers of other States. Sales by manufacturers are chiefly effected through agents. A tax upon their agents when thus engaged is, therefore, a tax upon them, and if this is made to depend upon the foreign character of the articles, that is, upon their having been manufactured without the State, it is to that extent a regulation of commerce in the articles between the States. It matters not whether the tax be laid directly upon the articles sold or in the form of licenses for their sale. If by reason of their foreign character the State can impose a tax upon them or upon the person through whom the sales are effected, the amount of the tax will be a matter resting in her discretion. She may place the tax at so high a figure as to exclude the introduction of the foreign article and prevent competition with the home product. It was against legislation of this discriminating kind that the framers of the Constitution intended to guard when they vested in Congress the power to regulate commerce among the several States.

In Welton v. State of Missouri we expressed at Iength our views on the subject, and to our opinion we may refer for their statement. No one questions the general power of the State to require licenses for the various pursuits and occupations conducted within her limits, and to fix their amount as she may choose, and no one on this bench-certainly not the writer of this opinion-would wish to limit or qualify it in any respect, except when its exercise may impinge upon the just authority of the Federal government under the Constitution, or the limitations prescribed by that instrument. But where a power is vested exclusively in that government, and its exercise is essential to the perfect freedom of commercial intercourse between the several States, any interfering action by them must give way. This was stipulated in the indissoluble covenant by which we became one people.

In a recent case we had occasion to consider at some length the extent of the commercial power vested in Congress, and how far it is to be deemed exclusive of State authority. Referring to the great variety of subjects upon which Congress, under that power, can act, we said that 'some of them are national in their character, and admit and require uniformity of regulation, affecting alike all the States; others are local, or are mere aids to commerce, and can only be properly regulated by provisions adapted to their special circumstances and localities. Of the former class may be mentioned all that portion of commerce with foreign countries or between the States which consists in the transportation, purchase, sale, and exchange of commodities. Here there can, of necessity, be only one system or plan of regulations, and that Congress alone can prescribe. Its non-action in such cases, with respect to any particular commodity or mode of transportation, is a declaration of its purpose that the commerce in that commodity or by that means of transportation shall be free. There would otherwise be no security against conflicting regulations of different States, each discriminating in favor of its own products and citizens and against the products and citizens of other States.' County of Mobile v. Kimball, 102 U.S. 691, 697.

Commerce among the States in any commodity can only be free when the commodity is exempted from all discriminating regulations and burdens imposed by local authority by reason of its foreign gorwth or manufacture.

The judgment of the Supreme Court of Appeals of Virginia must, therefore, be reversed, and the cause remanded to it for further proceedings in accordance with this opinion; and it is

So ordered.

title: Webber v. Virginia/Opinion of the Court


text: Talk:Webber v. Virginia/Opinion of the Court

license: Creative Commons - Attribution Share-Alike - https://creativecommons.org/licenses/by-sa/4.0/


text:
Insurance Company v. Kiger

ERROR to the Circuit Court of the United States for the District of Louisiana.

On the 11th of March, 1876, the General Assembly of Louisiana passed an act, No. 72, entitled 'An Act governing the manner in which cotton-press receipts, warehouse receipts, or the receipts of other custodians of any property whatever, shall be issued, in all cases where such receipts shall or may be used or pledged as collateral security for money advanced or borrowed on faith of the property therein specified, and governing the delivery and disposal of the property for which such receipts may be issued.' The sections important to this case are as follows:--

'SECT. 1. Be it enacted, &c., that no cotton-press, or other custodian or custodians of produce or property, shall issue any receipt, or other voucher, for any produce, merchandise, or other property, to any person or persons purporting to be the holder, owner, or owners thereof, unless such produce, merchandise, or other property shall have been actually received into store, or upon the premises of such cotton-press, or other custodian or custodians, shall be in the store, cotton-press, or warehouse, or on the premises aforesaid, or under his or their control at the time of issuing such receipt.

'SECT. 2. That any person, firm, or association who shall or may be, or in any way become the custodians of any property, goods, products, or merchandise whatever, and who may issue receipts therefor, shall not, under any circumstances, or upon any order or guarantee whatever, deliver property for which such receipts have been issued, until the party or parties to whom the receipts were issued, or the legal holders thereof, shall have surrendered the same to said custodians for cancellations, and in default of a strict compliance with the provisions of this section of this act, they may be held liable by the legal holder or owner of their receipt, for the market value of the property therein described, as may be established by the chamber of commerce of the city of New Orleans, or any committee thereof, approved and authenticated by the president or vice-president of said chamber of commerce. All warehouse receipts, intended for pledge, under the provisions of this act, shall be paraphed, before being issued, as follows: 'for hypothecation in accordance with the provisions of this act.'

'SECT. 4. That parties who may borrow money on the faith of warehouse receipts, representing property in store, shall file their affidavit with the pledgees that such property is theirs, the pledgers', personal property, or that it is the property of some party for whom the pledger is acting as agent, factor, commission merchant, or in any other fiduciary capacity, and that said party is justly and truly indebted to the pledger in an amount equal in value to the value of the property pledged, as specified in the warehouse receipts, for moneys paid to him, or paid by his order, and for his account, by the party or consignee making the pledge. The cashier of a bank, or the secretary of any insurance company, incorporated or working under any law in the United States, or of this State, is hereby authorized to administer the oath contemplated under the provisions of this act. Any deviation therefrom shall render the party or parties so deviating liable for the value of the property, or any excess in value, over and above the amount for which it may have been pledged, in any manner specified in section one of this act, and to prosecution for perjury, and also to obtaining money under false pretences.

'SECT. 5. That the vendor's line of five days' privilege, now allowed in commercial transactions, for the payment of the purchase price, shall not be affected by the provisions of this act, except in case in which a warehouse receipt has been pledged as collateral for money borrowed. The holder of the warehouse receipt shall be considered and held as the actual owner of the property described in the receipt, and no clause in this act shall operate to the detriment or injury of the holder of a warehouse receipt, to the extent of the value of the property specified, made, and issued in accordance with, and under the provisions of this act: Provided, that where the factor, agent, or pledger may have wrongfully pledged, in violation of this act, any property, the lien of the owner shall be valid, even against the third holder of the warehouse receipt.'

'SECT. 8. That all warehouse receipts, as by this act provided, shall be negotiable by indorsement in blank, or by special indorsement, in the same manner and to the same extent as bills of exchange and promissory notes now are.'

On the 19th of March, 1877, Basil G. Kiger, a planter in Mississippi, consigned to Aiken & Watt, his factors in New Orleans, one hundred and ninety-six bales of cotton, with instructions not to sell, but to hold for further directions and better prices. The cotton reached New Orleans March 21, and was stored by Aiken & Watt in the cotton-press of Sam. Boyd & Co. Aiken & Watt had no pecuniary interest whatever in the cotton, and Kiger, the consignor, was not indebted to them. On the contrary, they were largely indebted to him. On the 26th of March, Aiken & Watt borrowed of the Mechanics' and Traders' Insurance Company $4,500, for which they gave their notes to the company, payable in forty days, at eight per cent interest, secured by a cotton-press receipt of Boyd & Co., of which the following is a copy:--

'NEW ORLEANS, March 26, 1877.

'Received from Aiken & Watt the following-described property, to wit: one hundred bales cotton, marked , ex. Pargoud, March 21, 1877. Shipper's press. (Printed indorsement in the boty of the receipt:) 'The within cotton will not be delivered except on the return of this receipt to the press, properly indorsed.' Deliverable to the Mechanics' and Traders' Insurance Co. or order.

'SAM. BOYD & CO.'

Indorsement on the back of the receipt printed:--

'Deliver to _____ or order the within-described property. The above order is accepted, and the property is transferred to—

'SAM. BOYD & CO.'

Afterwards, on the 3d of April, Aiken & Watt borrowed $2,500 more from the company, and gave a similar press receipt for ninety-six bales as security. The cotton embraced in these receipts was that which belonged to Kiger.

Before the maturity of these notes Aiken & Watt failed. The notes were protested for non-payment when due, and the makers were adjudicated bankrupts June 16, 1877.

On the 18th of April, 1877, Kiger brought this suit against Boyd & Co., to recover the possession of his cotton. It was delivered to him under the writ which was issued, he giving bond according to law to return it in case of judgment against him to that effect. Afterwards the insurance company was called into the suit by Boyd & Co., and made a defendant by Kiger. The insurance company answered, setting up its claim to the property. Upon the trial, the foregoing facts appearing, the jury were instructed to return a verdict in his favor against the company.

To reverse the judgment rendered on that verdict, the case is now here by writ of error.

Mr. Thomas Hunton for the plaintiff in error.

Mr. Joseph P. Hornor, Mr. W. S. Benedict, and Mr. Thomas J. Semmes, contra.

MR. CHIEF JUSTICE WAITE, after stating the facts, delivered the opinion of the court.

title: Insurance Company v. Kiger


text: Talk:Insurance Company v. Kiger

title: Talk:Insurance Company v. Kiger


text:
Insurance Company v. Kiger/Opinion of the Court

There are two questions in this case: 1, whether the insurance company can hold the cotton as against Kiger; and, 2, whether, if it cannot, Boyd & Co. are liable for the amount for which their receipts were pledged.

1. As to Kiger. Before the act of 1876 it was settled by numerous decisions in Louisiana that a factor could not pledge for his own debts the property of his principal. Stetson v. Gurney, 17 La. 166; Hadwin v. Fisk, 1 La. Ann. 43-74; Miller v. Schneider & Zuberbier, 19 id. 300; Young v. Scott & Cage and Cavaroc, 25 id. 313. The act of 1876 does not, as it seems to us, materially enlarge this power, so far as the facts of this case are concerned. It makes warehouse receipts the representatives of property in store, and provides for their use to borrow money on; but the implication is clear that their use in that way by a factor for more than the value of his interest in the property would be wrongful and invalid against the owner. This we do not understand to be disputed by the counsel for the plaintiff in error. His claim is that there was in this case no pledge, but, 'as the effect of the stipulation in the press receipts,' 'an absolute transfer of the legal title to the insurance company by parties in possession having the absolute control of the property, and the security was thus taken to enable the insurance company to sell the cotton and reimburse themselves if the debt was not paid.' The transaction between the parties was certainly not a sale, and in the answer of the company it is distinctly stated that the cotton was delivered into the possession of the company to be held as security for the payment of the notes given for the money borrowed. Undoubtedly the possession of the receipts was equivalent to the possession of the property, but the title which the company acquired was such as grew out of its contract with the factors. That clearly was a pledge and nothing more. There was, first, the cotton; second, the debt for the money borrowed; and, third, the delivery of the property into the possession of the creditor, to be held as security for the debt. These are all the elements of a pledge, and fix the rights of the parties. Aiken & Watt were the pledgors, but as they were only factors and had no interest in the property as against Kiger, the owner, their pledge was wrongful and invalid as to him. The pledge was by a factor of the property of his principal, in which he had no interest whatever, as security for his own debt.

2. As to Boyd & Co. They were simply warehousemen. Their duty under the law was not to issue receipts until they had the property actually in store, and not to deliver the property until the receipts were surrendered for cancellation. They did have the property in store when they gave the receipts, and as soon as it was taken from them by judicial process they notified the insurance company, and upon that notice the company is now here asserting its title. This is a substantial compliance with their obligation not to deliver without a surrender of the receipts. There is no pretence of fraud or collusion, and we think it would be a surprise to warehousemen to be told, that when they issued their receipts for property in store they became not only responsible as custodians of the property, but guarantors of its title to the assignees of their receipts. Such a rule would make it necessary for a warehouseman, before giving a receipt, not only to ascertain whether he had the property actually in store, but whether the title of the bailor was valid and unincumbered. Certainly this could not have been in contemplation when warehouse receipts were made by statute negotiable and to some extent evidence of ownership. The duty of the warehouseman is performed when he gets the property into his own possession before he issues the receipt, and transfers that possession when demanded to the lawful holder of the receipt.

In this case the liability of Boyd & Co. is just what it would have been if the company had put the cotton in store and taken a receipt to its own order. The fact that Aiken & Watt originally stored the property is a matter of no importance so far as Boyd & Co. are concerned. The receipt in the hands of the company represented the cotton stored by Aiken & Watt, and gave the company the same rights it would have had if the cotton, instead of the receipt, had been handed over. The company got by the receipt such interest in the cotton as Aiken & Watt could by their pledge convey, and that is all Boyd & Co. agreed to deliver on the return of their receipt. Boyd & Co. cannot, as against the company, say they never had the cotton, or that they did not promise to deliver it on the return of their receipt by the lawful holder. They received the actual possession of the property from Aiken & Watt, and that possession they agreed to deliver to the insurance company when called On. This, as has just been seen, they have in legal effect done, and the rights of the parties in this case are to be determined precisely as they would be if the company had got the cotton from Boyd & Co., on the surrender of the receipts, and had afterwards been sued by Kiger for its possession.

Judgment affirmed.


text: Talk:Insurance Company v. Kiger/Opinion of the Court


text:
Wolff v. New Orleans

ERROR to the Circit Court of the United States for the District of Louisiana.

Mr. George S. Lacey for the plaintiff.

Mr. Benjamin F. Jonas and Mr. Henry C. Miller, contra.

MR. JUSTICE FIELD delivered the opinion of the court.

title: Wolff v. New Orleans


text: Talk:Wolff v. New Orleans

title: Talk:Wolff v. New Orleans


text:
Wolff v. New Orleans/Opinion of the Court

In March, 1876, the relator, Rebecca W. Wolff, recovered a judgment in the Circuit Court of the United States for the District of Louisiana, against the city of New Orleans, for the sum of $13,000. Execution was issued upon it and returned unsatisfied. She thereupon caused the judgment to be registered, under the act of the legislature of the State of 1870, known as Act No. 5, of the extra session of that year, to the provisions of which we shall hereafter refer; and then called upon the mayor and administrators of the city to pay it out of the contingent fund of the corporation, or, if it could not be paid in that way, to levy a special tax for its payment. The authorities having failed to comply with this request, she applied for a mandamus to compel them to pay it out of that fund or to levy a tax for that purpose, setting forth in her petition the recovery of the judgment, the issue of execution thereon, its return unsatisfied, and the refusal of the city authorities, as stated. An alternative writ was accordingly issued.

To this writ the city authorities appeared, and filed an answer to the petition, in which they admitted the recovery of the judgment, the issue of the execution, and its return unsatisfied, and set up that the judgment was recovered on bonds of the city issued to the New Orleans, Jackson, and Great Northern Railraod Company, under the act of the legislature of the State, approved on the 15th of March, 1854; that no tax for the payment of the principal of those bonds was directed to be levied by that act, or any other act of the State; that there was no contingent fund of the city out of which the judgment could be paid; and that there were no moneys to the credit of the fund for current expenses, not otherwise appropriated; and that for these reasons they had not budgeted the judgment or levied a tax for its payment, and could not levy a special tax for that purpose. In an amended answer they further set up that at the time the bonds, upon which the judgment was recovered, were issued, a general statute of the State prohibited municipal corporations from incurring any debt or liability unless in the ordinance creating the same full provision was made for the payment of the principal and interest; and that a special statute prescribing the form of the ordinance by which a particular debt could be created, a declared that such ordinance should be submitted to the legal voters of the corporation, and that the assent of the majority of them should be a condition of its validity; that the ordinance thus submitted providing for the issue of the bonds contained no provision for levying a tax to pay the principal of them, but contained another provision deemed ample for that purpose; and that, therefore, it was the evidence intention of the legislature that the principal debt should be thus paid and not by means of taxation.

The relator demurred to the return of the respondents, but it would seem that when the demurrer was called, the case was submitted upon the pleadings and certain proofs which had been filed. The court decreed that the city authorities, exercising the discretion vested in them according to section 3 of Act No. 5, of the extra session of 1870, should appropriate from the money set apart in the budget or annual estimate for contingent expenses a sufficient sum of money to pay the judgment; but that if no appropriation be made by the common council of the city, the judgment should be paid according to its priority of filing and registry in the office of the controller, from the first money in the next annual estimate set apart for that purpose. The decree was accompanied by a provision that nothing therein should required the common council to assess or levy any tax upon the city for the payment of the judgment, until the legislature of the State should authorize the same, thus assuming that existing degislation did not permit any such tax. To reverse this decree the relator has brought the case to this court.

The act which authorized the issue of the bonds, upon which the relator recovered judgment, provided that the railroad company should issue to the city certificates of stock equal in amount to the bonds received, and declared that the stock should remain 'forever pledged for the redemption of said bonds.' It made no other provision for the ultimate payment of the principal, but provided that a special tax should be levied each year to pay the annual interest. It is contended that only to the stock thus pledged and the income from it were the bondholders to look for the payment of the principal. The same position was urged in United States v. New Orleans, on the application by the relator in that case for a mandamus to compel the city authorities to levy a tax to pay judgments recovered upon similar bonds, and was adjudged to be untenable. 98 U.S. 381. The court held that the indebtedness of the city was conclusively established by the judgments recovered against it, and that their payment was not restricted to any species of property or revenues, or subject to any conditions. If there were any limitations upon the means by which payment of the bonds was to be had, they should have been insisted upon when the suits were pending, and have been continued in the judgments. The fact that no such limitations were there found was conclusive that none existed.

The court also held that if the question were an open one its conclusion would be the same; that the declaration of the act, that the stock which the city was to receive from the railroad company should remain 'forever pledged for the redemption of said bonds,' only created a statutory pledge by way of collateral security for their pyament, and did not release the city from its primary liability; and that the bondholder was not bound to look to that security, but could proceed directly against the city without regard to it.

The court further held that the statutes of the State restraining municipal corporations from creating any indebtedness, without providing at the same time for the payment of the principal and interest, were not limitations upon the power of the legislature to authorize the creation of debts by such corporations upon other conditions; and though as a general rule it was deemed expedient to prohibit cities from incurring debts on their own motion, without making provision for their payment, it did not follow that the legislature might not authorize the incurring of a particular obligation without such provision; and, in the instance mentioned, the statute prescribed the details of the ordinance to be passed by the city in execution of the authority conferred.

The views thus expressed dispose of the objections to the mandamus in this case, founded upon what is contained in the railroad act as well as what is omitted from it. Nothing new has been presented to our consideration to lead us to doubt the correctness of our conclusions. There is no occasion, therefore, to repeat the reasons upon which they were founded.

But counsel also urge in their argument against the granting of the mandamus, that the power of a city to levy a tax upon property for all purposes, judgments included, is limited by acts of the legislature to one dollar and fifty cents on every one hundred dollars of valuation, and that the amount thus raised is insufficient to meet the current expenses of the city and pay previous judgments of other parties. They repeat the averments of the answer, that there was no contingent fund of the city out of which the judgment of the relator could be paid, nor moneys to the credit of the fund for current expenses not otherwise appropriated. They cite the charter of 1870, which requires a budget to be made in December of each year, exhibiting the various items of liability and expenditure for the ensuing year, and the act of March 6, 1876, which limits the right of taxation upon property by the city to one dollar and fifty cents on every one hundred dollars of its assessed value. They also insist that the conditions on which judgments against the city are to be paid are prescribed in Act No. 5 of the extra session of 1870.

This last act provides that no writ of execution or feri facias shall issue from any of the courts of the State to enforce the payment of any judgment for money against the city of New Orleans; but that such judgment, when the same shall have become executory, shall have the effect of fixing the amount of the plaintiff's demand, and that he may cause a certified copy of it, with his petition and the defendant's answer, and the clerk's certificate that it has become executory, to be filed in the office of the controller of the city, and that thereupon it shall be the duty of the controller or auditing officer to cause the same to be registered and to issue a warrant upon the treasurer or disbursing officer of the corporation for the amount, without any special appropriation of money therefor, 'provided always that there be sufficient money in the treasury to pay such judgment, specially designated and set apart for that purpose in the annual budget or detailed statement of items of liability and expenditure required to be made' by sect. 124 of the act of March 20, 1856, amending the city charter, or by subsequent legislation.

The act further provides that in case the amount designated in the annual budget for the payment of judgments against the city shall have been exhausted, the 'common council shall have power, if they deem it proper, to appropriate from the money set apart in the budget or annual estimate for contingent expenses, a sufficient sum of money to pay said judgment or judgments, but if no such appropriation be made by the common council, then all judgments shall be paid, in the order in which they shall be filed and registered in the office of controller, from the first money next annually set apart for that purpose.'

The respondents contend that, under these provisions, no judgment creditor can claim that his judgment shall be paid absolutely, for its payment is made to depend upon the conditions stated; or insist upon an appropriation in the budget for any fixed sum, for this is controlled by the limit of taxation and the amount of necessary expenditures to sustain the government of the city. The amount for judgments to be provided annually, they say, is to be fixed by the discretion of the common council in framing the budget; and this discretion is to be guided by the limit of taxation for all purposes, and the amount required for police, lights, paving streets, public schools, and other necessary expenses of the city. These expenditures have heretofore exhausted, and, if the limit of taxation prescribed by the act of March 6, 1876, be enforced, will hereafter continue to exhaust, nearly all the funds raised. The balance remaining is, and, with that limit of taxation, always will be, insufficient to pay any considerable portion of the earliest judgments against the city. So the relator must wait for an indefinite period,-perhaps until the statute has barred her claim,-and take the uncertain chance of obtaining from the city in the distant future any portion of the sum due to her.

The act of March 6, 1876, giving effect to what is known as the 'Premium bond plan,' does not hold out to the bondholder the delusive hope of payment in the distant future, which flitters around Act No. 5 of 1870; it cuts him off absolutely, unless he will accept the conditions of the proposed plan. It recities in its preamble that the total debt of the city, bonded and floating, exceeds $23,000,000; that the taxable property of the city has become so reduced in value as to require a tax at the rate of at least five per cent per annum to liquidate the debt; that a tax so exorbitant will render its collection impossible; that the continuation of a tax beyond the ability of the property to pay would lead to a further destruction of the assessable property of the city and to ultimate bankruptcy; and that the city has adopted a plan for the liquidation of its indebtedness, looking to the payment of its creditors in full, 'obtaining thereby the indulgence necessary for the public well-being and the maintenance of the public honor.'

The plan proposed was an exchange of outstanding bonds for premium bonds; the latter to be of the denomination of twenty dollars each, bearing five per cent interest from Sept. 1, 1875, payable at no designated period, the interest and principal to be paid at the same time and not separately, and the maturity of the bonds-principal and interest-to be determined by chance in the drawing of a lottery. One million of these bonds is to be divided into ten thousand series of one hundred bonds each. The ten thousand series are to be placed in a wheel, and, in April and October of each year, as many series are to be drawn as are to be redeemed, according to a certain schedule adopted. The bonds composing the series thus drawn are to be entered for payment three months thereafter, principal and interest, and are to be receivable for all taxes, licenses, and other obligations of the city. At the expiration of the three months the bond numbers of the drawn series are to be placed in a wheel and 1,176 prizes, amounting to $50,000, are to be drawn and distributed. Under this plan the city is released from payment of the principal or interest of its debt, except such portion as may be drawn from the lottery each year. As justly observed by counsel in one of the cases before us, under this arrangement, whether a creditor will be paid in one or in fifty years, will depend upon the turn of a wheel and the drawing of a lucky number. Of course this plan disregards all the terms upon which the outstanding bonds of the city-and, among others, those held by the relator were issued, and postpones indefinitely the payment of both their principal and interest. To induce its adoption by the city's creditors, the act, in its seventh section, provides that no tax for the payment of the principal or interest of other than the premium bonds shall thereafter be levied; repeals all laws requiring or authorizing the city to pay any such tax, and declares that it shall be incompetent for any court to issue a mandamus to the officers of the city to levy and collect any interest tax other than on the premium bonds.

For the interest on the premium bonds and other purposes of the city, the act provides that a tax of only one and one-half per cent per annum, shall be levied; and this limitation of the taxable power of the corporation is 'declared to be a contract not only with the holder of said premium bonds, but also with all residents and taxpayers of said city, so as to authorize any holder of said premium bonds to legally object to any rate of taxation in excess of the rate herein limited.'

It is plain that if the provisions of this act can be sustained as a valid exercise of legislative power, the judgment of the relator is practically annulled or rendered so uncertain of payment as to be of little value.

When the bonds were issued, upon which the judgment was recovered, the city was by its charter invested with 'all the powers, rights, privileges, and immunities incident to a municipal corporation and necessary for the proper government of the same;' and it could have provided the means, by taxation, for their payment when they became due. As we said in the case already cited, 'the power of taxation is an incident to such a corporation, and may be exercised for all the purposes authorized by its charter or subsequent legislation. Whatever the legislature empowers the corporation to do is presumably for its benefit, and may, in 'the proper government of the same,' be done.' Besides the power thus existing at the time the bonds were issued, the act providing for their issue directed, as already stated, a special tax to be levied each year to meet the annual interest on them. Such being the case, the question is, whether the city has been divested of its power by the act of 1876, which we have mentioned.

The argument in support of the act is substantially this: that the taxing power belongs exclusively to the legislative department of the government, and when delegated to a municipal corporation may, equally with other powers of the corporation, be revoked or restricted at the pleasure of the legislature.

It is true that the power of taxation belongs exclusively to the legislative department, and that the legislature may at any time restrict or revoke at its pleasure any of the powers of a municipal corporation, including, among others, that of taxation, subject, however, to this qualification, which attends all State legislation, that its action in that respect shall not conflict with the prohibitions of the Constitution of the United States, and, among other things, shall not operate directly upon contracts of the corporation, so as to impair their obligation by abrogating or lessening the means of their enforcement. Legislation producing this latter result, not indirectly as a consequence of legitimate measures taken, as will sometimes happen, but directly by operating upon those means, is prohibited by the Constitution, and must be disregarded-treated as if never enacted-by all courts recognizing the Constitution as the paramount law of the land. This doctrine has been repeatedly asserted by this court when attempts have been made to limit the power of taxation of a municipal body, upon the faith of which contracts have been made, and by means of which alone they could be performed. So long as the corporation continnes in existence, the court has said that the control of the legislature over the power of taxation delegated to it is restrained to cases where such control does not impair the obligation of contracts made upon a pledge, expressly or impliedly given, that the power should be exercised for their fulfilment. However great the control of the legislature over the corporation while it is in existence, it must be exercised in subordination to the principle which secures the inviolability of contracts.

The case of Von Hoffman v. City of Quincy, reported in 4th Wallace, is a leading one on this subject. There the legislature of Illinois had in 1851, 1853, and 1857 passed acts authorizing that city to subscribe for stock of certain railroad companies, and in payment thereof to issue its bonds with coupons for interest annexed. Those acts authorized the city to levy a special annual tax upon the property therein, real and personal, to pay the annual interest upon the bonds, and required that the tax when collected should be set aside as a special fund for that purpose. The city failed to pay the coupons held by the relator for a long time after they became due, and refused to levy the tax necessary for that purpose. The relator thereupon sued the city and recovered judgment. Execution issued thereon being returned unsatisfied, he applied to the Circuit Court of the United States for the Southern District of Illinois for a mandamus to compel the authorities of the city to apply to the payment of the judgment any unappropriated funds they had, or, if they had no such funds, to levy a tax under the acts mentioned sufficient for that purpose. The court issued an alternative writ, to which the city authorities answered setting up an act of the legislature of the State, of November, 1863, authorizing the city council to levy a tax for certain special purposes, such as lighting the streets and erecting buildings for schools, and also a tax on all real and personal property to pay the debts and meet the general expenses of the city not exceeding fifty cents on each one hundred dollars of the annual assessed value thereof, and repealing all other laws touching taxes except such as related to their collection, or to streets, alleys, and licenses. And they alleged that the full amount of taxes thus authorized was in process of collection; that the power of the city in that respect was exhausted; and that the fifty cents on the one hundred dollars when collected would not be sufficient to pay the annual expenses for the year 1864, and the debts of the city. The relator demurred to the answer, and judgment was given against him; but the case being brought to this court, the judgment was reversed. In delivering the unanimous opinion of the court, Mr. Justice Swayne said:--

'It is well settled that a State may disable itself by contract from exercising its taxing power in particular cases. It is equally clear that where a State has authorized a municipal corporation to contract, and to exercise the power of local taxation to the extent necessary to meet its engagements, the power thus given cannot be withdrawn until the contract is satisfied. The State, and the corporation, in such cases, are equally bound. The power given becomes a trust which the donor cannot annul, and which the donee is bound to execute; and neither the State nor the corporation can any more impair the obligation of the contract in this way than in any other. The laws requiring taxes to the requisite amount to be collected, in force when the bonds were issued, are still in force for all the purposes of this case. The act of 1863 is, so far as it affects these bonds, a nullity. It is the duty of the city to impose and collect the taxes in all respects as if that act had not been passed. A different result would leave nothing of the contract, but an abstract right,-of no practical value,-and render the protection of the Constitution a shadow and a delusion.' 4 Wall. 535, 554.

The prohibition of the Constitution against the passage of laws impairing the obligation of contracts applies to the contracts of the State, and to those of its agents acting under its authority, as well as to contracts between individuals. And that obligation is impaired, in the sense of the Constitution, when the means by which a contract at the time of its execution could be enforced, that is, by which the parties could be obliged to perform it, are rendered less efficacious by legislation operating directly upon those means. As observed by the court in the case cited, 'without the remedy the contract may indeed, in the sense of the law, be said not to exist, and its obligation to fall within the class of those moral and social duties which depend for their fulfilment wholly upon the will of the individual. The ideas of validity and remedy are inseparable, and both are parts of the obligation which is guaranteed by the Constitution. The obligation of a contract 'is the law which binds the parties to perform their agreement."

The restraint upon the legislature, to the extent mentioned, by the contract clause of the Constitution, against revoking or limiting the power of taxation delegated by it to municipal bodies as the means of carrying out the purposes of their incorporation or purposes designed for their benefit, is a different matter from that of exempting property from taxation; and even in the latter case it has been adjudged in repeated instances that one legislature can bind its successors. The restraint in no respect impairs the taxing power of the existing legislature or of its successors, or removes any property from its reach.

These views are not inconsistent with the doctrine declared by the decision of the court in the recent case of Meriwether v. Garrett, 102 U.S. 472. There the charter of the city of Memphis had been repealed, and the State had taken the control and custody of her public property, and assumed the collection of the taxes previously levied, and their application to the payment of her indebtedness. The city with all her officers having thus gone out of existence, there was no organization left-no machinery-upon which the courts could act by mandamus for the enforcement of her obligations to creditors. The question considered, therefore, was whether the taxes levied before the repeal of the charter, but not paid, were assets which the court could collect through a receiver and apply upon judgments against the city.

Here, the municipal body that created the the obligations upon which the judgment of the relator was recovered, existing with her organization complete, having officers for the assessment and collection of taxes, there are parties upon whom the courts can act. The courts, therefore, treating as invalid and void the legislation abrogating or restricting the power of taxation delegated to the municipality, upon the faith of which contracts were made with her, and upon the continuance of which alone they can be enforced, can proceed and by mandamus compel, at the instance of parties interested, the exercise of that power as if no such legislation had ever been attempted. And that the relator seeks to have done here.

Following the doctrine of Von Hoffman v. City of Quincy, we are of opinion that the act of March 6, 1876, the provisions of which we have stated, is invalid so far as it limits the power which the city possessed, when the bonds upon which the relator has recovered judgment were issued, to levy a tax for their payment. In thus limiting the power without providing other adequate means of payment of the bonds, the legislature has impaired the obligation of the contract between her and the city.

The judgment of the court below must, therefore, be reversed, and the cause remanded with directions to issue the writ as prayed in the petition of the relator; and it is

So ordered.

MR. JUSTICE HARLAN.

I concur in the opinion just delivered, except the paragraph in which reference is made to Meriwether v. Garrett, 102 U.S. 472. The present case does not require us to determine any question as to the effect which the repeal of a municipal charter may have upon the rights of existing creditors. Nor do I wish to be understood as assenting to the correctness of the statement in the opinion as to what was involved and decided in Meriwether v. Garrett.


text: Talk:Wolff v. New Orleans/Opinion of the Court


text: Neal v. Delaware

title: Neal v. Delaware


text: Talk:Neal v. Delaware

title: Talk:Neal v. Delaware