1. The act of the General Assembly of the state of Louisiana of
Feb. 23, 1852, entitled "An Act to consolidate the City of New
Orleans and to provide for the government and administration of its
affairs," is not in conflict with article 118 of the state
constitution of 18I5, which declares that "every law enacted by the
legislature shall embrace but one object, and that shall be
expressed in the title." Nor does section 37 of the act (infra,
p. 105 U. S. 279)
violate article 127 of that Constitution (infra, p.
105 U. S.
290), touching equality and uniformity of taxation.
2. That article applied only to state taxes, and required that
all the property on which they were levied -- not all property in
the state -- should be taxed according to its value and conformably
to some fixed rate or mode.
3. By accepting the bonds which were issued under that section
and the supplementary act passed the same day, known as No. 72, and
which formed the consolidated debt of New Orleans, the creditors of
the city, of the municipalities, and of Lafayette entered into a
contract with the city, an essential part whereof was the pledge to
levy an annual tax of a specified amount for the payment of
interest and principal. Although slavery has been abolished, the
obligation of the city to raise the required fund by special tax on
real estate remains, and the right of the bondholders to enforce it
is not waived by having received for years without objection the
stipulated interest raised in another mode than that for which the
contract provides.
4. The act of the General Assembly of Louisiana of March 6,
1876, so far as it relates to the consolidated debt, is null and
void inasmuch as it provides for exchanging the debt for premium
bonds, each of the denomination of twenty dollars, dated Sept. 1,
1875, the principal and interest to be paid at a time to be
determined by chance in a lottery, and prohibits the levying of the
stipulated tax to pay the interest due upon that debt. It also
attempts to deprive the creditor of the means of enforcing payment
which existed when the debt was contracted, and it furnishes no
other adequate remedy.
ERROR to the Supreme Court of the state of Louisiana.
This was a petition of the state of Louisiana, on the
relation
Page 105 U. S. 279
of the Southern Bank, a corporation created under its laws and
doing business in New Orleans, to one of its district courts, for a
mandamus to compel the municipal authorities of that city to levy a
special tax to pay certain coupons on outstanding bonds issued
under an act of the state in 1852, and to purchase the bonds with
any surplus remaining of the moneys collected. The history of the
issue of the bonds is as follows: the City of New Orleans was
originally incorporated by an act of the legislature in 1805, and
its charter continued in force until the 8th of March, 1836. An act
was then passed which divided the city into three municipalities,
each of which was created a distinct corporation, with "such
rights, powers, and capacities as are commonly incident" to
municipal bodies. This division continued until Feb. 23, 1852,
when, by an act known as act No. 71 of that year, and entitled "An
Act to consolidate the City of New Orleans and to provide for the
government and administration of its affairs," the three
municipalities were again united into one. The act of 1836 provided
that a proportionate part of the debt of the city should be paid by
each municipality, the quota being fixed upon the basis of the
amount of taxes and other revenue accruing to it. The separate
municipalities subsequently created debts; and the Act of Feb. 23,
1852, provided for the issue of bonds for the payment of those
debts, and also for the debt of the old city. The thirty-seventh
section, which dealt with this subject, is as follows:
"SEC. 37.
Be it enacted, &c., that the debt of the
general sinking fund, commonly called the old city debt, and the
debts of the three municipalities, whether in the form of bonds,
notes, interest coupons, cash warrants, or other species of
obligation whatever, shall be assumed and paid by the City of New
Orleans, and said city is hereby declared liable therefor. The
mayor, comptroller, and treasurer, and chairmen of the finance
committees of the two boards of the common council, shall
constitute a commission, to be called the commissioners of the
consolidated debt of New Orleans; and they shall have power to
issue bonds of the City of New Orleans, having not more than forty
years to run, with interest payable at such place as may be agreed
on between said commissioners and the parties to whom the bonds are
issued, in semi-annual coupons,
Page 105 U. S. 280
in exchange for any bonds, obligations, or debts of the
old corporation, or of any of the old municipalities, whether
matured or not, or to sell the new bonds and apply the proceeds to
the payment of the matured debts of the old corporation or of the
municipalities, but to no other purpose. The bonds thus issued
shall form a stock to be called the consolidated debt of New
Orleans. At the time this act goes into operation, an exact and
detailed statement of the indebtedness of the old corporation and
of each municipality shall be filed in the office of the
comptroller, by the secretary of the board of liquidators and the
municipal comptrollers respectively, when the commissioners of the
consolidated debt shall proceed to divide the debt of the old
corporation between the several municipalities, in proportion to
the assessed value of real estate within the limits of each,
according to the state assessment roll for 1851. The amount thus
apportioned to each, together with its individual indebtedness at
the time this act goes into operation, shall constitute the
separate debt of each municipality, and shall be known as the debt
of municipality No. one, No. two, No. three. The common council
shall, annually, in the month of January, pass an ordinance to
raise the sum of six hundred thousand dollars, by a special tax, on
real estate and slaves, to be called the consolidated loan tax, and
the rate percent of said tax, in each municipality, shall be in
proportion to the indebtedness of each. All ordinances,
resolutions, or other acts passed by said council, after the first
day of January in each year, shall be null and void, unless the
ordinance imposing the consolidation loan tax shall have been
previously passed. At the end of each and every year, any surplus
of the consolidated loan tax remaining in the treasury, after the
payment of all the interest and the expenses of the management of
said debt, shall be applied to the purchase, from the lowest
bidder, of such bonds issued under this act, as have the shortest
period to run; and the common council shall have the right of
rejecting all bids demanding more than the face of the bonds; for
which purpose, public notice shall be given by the comptroller in
the official gazette for thirty days, inviting proposals from
bondholders for the sale, to the city, of the bonds herein
described. From and after the passage of this act no obligation or
evidence of debt of any description whatever, except those herein
authorized, shall be issued by the City of New Orleans or under its
authority; nor shall any loan be contracted, unless the same be
authorized by a vote of a majority of the qualified voters of said
city, which shall be taken in the manner prescribed by the city
council, after ten days proclamation by the mayor, in the
newspaper
Page 105 U. S. 281
chosen by the common council; and no ordinance creating a debt
or loan shall be valid, unless such ordinance shall prescribe ways
and means for the punctual discharge at maturity of the capital
borrowed or debt incurred; and such ordinances shall not be
repealed until principal and interest of the capital borrowed or
the debt incurred are fully paid and discharged."
By a supplementary act approved on the same day, known as No. 72
of the year, the adjacent City of Lafayette was added to the City
of New Orleans, and provision was made for the assumption and
payment of its debt. The fifth section of the act is as
follows:
"SEC. 5.
Be it further enacted, &c., that the debt
of the City of Lafayette shall be assumed and paid by the City of
New Orleans, and the said City of New Orleans is hereby declared
liable therefor; and the amount of said debt shall be ascertained,
and its payment provided for and made in the same manner as the
debt of each municipality of New Orleans is ascertained and
provided for in the act to which this act is a supplement; and in
raising annually the consolidation loan tax for the payment of the
debt of New Orleans, an additional sum of fifty thousand dollars
shall be raised for the purpose of providing for the debt of the
City of Lafayette, now added to that of New Orleans, so that the
whole amount of the annual levy of taxes for the payment of the
debt of New Orleans shall be six hundred and fifty thousand
dollars."
Under these acts, No. 71 and No. 72, the commissioners of the
consolidated debt issued bonds of the City of New Orleans, known as
consolidated bonds, to the amount of ten million dollars, in
exchange for the bonds, obligations, and debts of the old city, of
the three municipalities, and of the City of Lafayette. Of this
amount bonds exceeding five million dollars have been paid by funds
received under the tax levied pursuant to the provisions of the
thirty-seventh section of act No. 71 and of the fifth section of
act No. 72, beyond what was necessary to meet the annual interest.
There remain outstanding bonds for more than four million dollars,
with interest since 1876. Of these bonds, with unpaid coupons, the
relator owns upward of six hundred, each for the sum of one
thousand dollars.
Page 105 U. S. 282
The petition refers to the Acts No. 71 and No. 72 of 1852, and
cites at length the sections mentioned. It also alleges that the
bonds issued under them were negotiable securities; that by reason
of the law providing for the payment of the interest and the
gradual reduction of their number through a sinking fund, they were
negotiated at their par value or above it, and distributed in the
markets of Europe and of the United states in the due course of
business as a secure, permanent, and trustworthy investment; that
the free banks of the state were compelled to invest in them to
secure the circulation of their bills, and that individuals and
corporations did likewise with confidence in the provisions of sec.
37 of act No. 71, and sec. 5 of act No. 72, for the maintenance and
enforcement of which the public faith of the state of Louisiana and
of the City of New Orleans was inviolably pledged.
The petition then alleges that, in violation of the provisions
of law mentioned, which constitute a contract with the bondholders,
binding both upon the state of Louisiana and the City of New
Orleans, the legislature of the state, on the 12th of March, 1874,
passed an act entitled
"An Act to postpone the levy and collection by the City of New
Orleans of a tax for a sinking fund for the purchase of its bonds,
to authorize the administrators of the city to modify the last
budget and tax levy, and to repeal conflicting laws and
penalties,"
the object of which was to relieve the authorities of the city
until December, 1876, from the duty of estimating, levying, and
collecting any tax for a sinking fund for the purpose of purchasing
any of the bonds issued under the acts mentioned.
The petition also alleges that, in further violation of the
provisions of the act of 1852, and of the contract with the holders
of the bonds, the legislature, on the 6th of March, 1876, passed
another act, designed, as stated in its title, to adjust, regulate,
and provide for the bonded debt of the City of New Orleans, and
authorize the exchange of its bonds for other bonds to be issued on
the plan known as the premium bond plan, the avowed object of which
was to impair, if possible, the obligation of the contract between
the bondholders and the city, and divest the rights acquired by
them under it, by prohibiting the city authorities from levying a
tax in any year under the provisions
Page 105 U. S. 283
of the acts of 1852, by shackling the judicial tribunals in the
issue of process, and by repealing the provisions of that act. The
seventh section is as follows:
"SEC. 7.
Be it further enacted, &c., that no tax
for the payment of bonds of interest on bonds other than that
authorized by the preceding sections [the premium bonds], shall be
levied either for the year 1876, or any year of years thereafter,
by the City of New Orleans, and that all existing laws requiring or
authorizing the city council to levy any tax whatsoever for bonds
or interest on bonds, other than said premium bonds, be and the
same are hereby repealed; and it shall be hereafter incompetent for
any court to mandamus the officers of said city to levy and collect
any interest tax other than that provided in this act, or in case
of such mandamus, by a receiver or otherwise, to direct the levy
and collection of any such tax."
The petition then avers that these acts of the Legislature of
Louisiana are in conflict with the Constitution of the United
states in that they impair the obligation of the contract between
the bondholders and the city; that nevertheless the authorities of
the city, its mayor and administrators, in disregard of the
provisions of the acts of 1852, and in contempt of their duties and
of the right of the relator and other bondholders similarly
situated, have refused to perform the duty imposed upon them by
those acts for the years 1874, 1875, 1876, and 1877, to levy a
special tax for the payment of the matured coupons and the purchase
of bonds; that they have levied upon the property subject to the
levy of such special tax for the payment of the consolidated bonds,
other taxes to meet other bonds issued by the city in disregard of
the prohibitory clauses of sec. 37 of the act of 1852, and the
moneys collected have been applied to the payment of those bonds,
and other illegal purposes; that the authorities of the city have
been notified to levy the special tax required for the years
mentioned, but they have refused to discharge their duty in that
particular, and, in place thereof, have sought by all sorts of
frivolous and unfounded technicalities to contest the validity and
integrity of the consolidated bonds; that the relator has demanded
payment of the matured coupons held by it, which
Page 105 U. S. 284
was refused, the city authorities answering that there were no
funds out of which they could be paid; and that the city and the
taxable real estate within its limits are liable for the payment of
the matured coupons and for the purchase of said bonds to the
extent of $650,000 per annum, for the years 1874, 1875, 1876, and
1877, less coupons paid for 1874 and 1875.
The petitioner, therefore, prays for a mandamus and an
injunction; the former, commanding the city authorities to levy the
special tax of $650,000 for the years named; and the latter,
enjoining them from levying any other tax on real estate within the
limits of the city which is subject to the special tax for the
consolidated debt, until the special tax has been levied.
Upon the petition, an alternative writ of mandamus was issued,
requiring the city authorities to show cause why they should not
comply with its prayer.
The authorities appeared on the return day and excepted to the
jurisdiction of the court to grant the writ, on the following
grounds:
1st, that by the provisions of the acts of the legislature --
No. 5 of the extra session of 1870, and No. 31 of 1876 -- the
courts of the state were prohibited from issuing a writ of mandamus
to compel the respondents to pay any debt not liquidated by
judgment, or to levy and collect any interest tax other than that
provided in act No. 31 of 1876 (the premium bond act).
2d, that the duty of the respondents, by the city charter and
the sixth section of the act No. 31 of 1876, was limited to the
levy and collection of a tax on the assessed value of all property
subject to taxation within the city, at a rate not exceeding one
and one-half percent on the dollar, to meet all expenses of the
city government, and to pay the interest on its bonded debt.
3d, that the respondents are expressly forbidden, by said act
No. 31 of 1876, from levying the tax demanded for the year 1876, or
for any year afterwards.
4th, that the legislature, by act No. 53 of 1874, had suspended
the levy and collection of any tax for the sinking fund under the
act of 1872 until December, 1876, which, the respondents
Page 105 U. S. 285
charge, was passed with the assent of the Southern Bank.
And if the exceptions should be overruled, the respondents,
reiterating and pleading the matters contained in them as part of
their answer, further add:
5th, that the provisions of the thirty-seventh section of act
No. 71 of 1852 are unconstitutional and void, because their object
is not expressed in the title of the act, as required by art. 118
of the Constitution of 1845, in force at the time.
6th, that the tax provided by the section mentioned is
unconstitutional and void, and in violation of sec. 127 of the
Constitution of 1845, and art. 123 of the Constitution of 1852;
because, first, it is to be assessed on real estate and slaves, and
not on personal property; and, secondly, because the rate percent
of the tax in each municipality is to be in proportion to the
indebtedness of each.
By a supplementary answer, the respondents reiterated the same
objections to the with in more ample terms.
Various parties, including the state of Louisiana, holders of
premium bonds, owners of real estate in the city, and taxpayers,
were allowed to intervene under the practice which obtains in
Louisiana, and various exhibits produced by them were made part of
the case.
In March, 1878, the district court gave judgment granting a
peremptory writ of mandamus as prayed, and denying the injunction.
On appear to the supreme court of the state this judgment was
reversed, and judgment entered that the demand of the relator be
dismissed, with costs, in both courts. To review this judgment, the
case is brought to this court.
MR. JUSTICE FIELD, after stating the case, delivered the opinion
of the Court.
As will be seen by the statement of the case, the petition for
the mandamus proceeds upon the theory that the transaction,
Page 105 U. S. 286
authorized by the thirty-seventh section of the act of 1852, and
the fifth section of the supplementary act of the same day, when
consummated by the issue of the bonds of the City of New Orleans,
and their exchange for the obligations of the old city, of the
three municipalities, and of the City of Lafayette, constituted a
contract between the city and the bondholders, and obligations of
which could not be subsequently impaired by state legislation; and
that the provision pledging the levy and collection of an annual
tax of $600,000, increased by the supplementary act to $650,000,
for the payment of the interest on the bonds, and their gradual
retirement, was an essential part of that contract.
On the other hand, the city authorities, the respondents here,
deny the validity of the act of 1852, on two grounds: 1st, that its
object is not sufficiently expressed in its title, under the
Constitution of 1845; and, 2d, that in providing for a tax to be
levied upon real estate and slaves, to the exclusion of personal
property, and in proportion to the indebtedness of each
municipality, it violates the Constitution of 1845, which requires
equality and uniformity of taxation throughout the state. And they
also invoke against the issue of the writ the subsequent
legislation of the state limiting the taxes which shall be levied
upon property in the city, prescribing the purposes to which they
shall be applied, prohibiting the levy and collection of any other
tax, and depriving the courts of the state of the power to issue a
mandamus to compel them to pay any debt not liquidated by judgment,
or to levy and collect any interest tax other than that provided by
the premium bond act of 1876.
Assuming for the present that the act of 1852 is not invalid,
for the reasons stated, the first inquiry is as to the character of
the transaction authorized by it and the supplementary act. Did it,
when consummated, amount to a contract between the city and parties
subsequently taking the bonds; and did the pledge to levy the
annual tax named form a part of the contract? Unless both of these
questions can be answered in the affirmative, it will be to no
purpose to inquire into the subsequent legislation of the state
respecting the tax, as no inhibition would rest upon its power over
the subject.
Page 105 U. S. 287
The acts of 1852 consolidated the three previously existing
municipalities within the limits of New Orleans into one, and added
to it the adjacent City of Lafayette. The new corporation took all
the property and interests of the municipalities, and of Lafayette,
and consequently became subject to their obligations. The
advantages which accrued from the possession of their property were
accompanied with the burdens of their debts. This liability was
not, however, left to rest upon any general principles of corporate
liability in such cases. The legislature recognized its existence,
and in consolidating the municipalities and the corporation of
Lafayette, declared that the debts of the old corporation, of the
municipalities, and of that city, should be assumed and paid by the
City of New Orleans, which was declared to be liable therefor. The
first of the acts appointed commissioners of the debt thus
consolidated, and authorized them to issue new bonds of the city
having forty years to run, with interest coupons payable
semiannually, in exchange for the obligations and debts of the old
corporation, and of the municipalities, to which the debts of
Lafayette were subsequently added by the supplementary act. To meet
the interest, it provided that the common council of the city
should annually, in month of January, pass an ordinance to raise
the sum of $600,000, increased to $650,000 by the supplementary
act, by a special tax on real estate and slaves, to be called the
consolidated loan tax. It also provided that any surplus remaining
at the end of each year, after payment of the interest on these
bonds, and the expenses of managing the debt, should be applied to
the purchase of such of the bonds as might have the shortest period
to run. These provisions, until the bonds were accepted, were in
the nature of proposals to the creditors of the old city, of the
municipalities, and of Lafayette. The state in effect said to them:
the city will give these bonds, running for the period designated,
and drawing interest, in exchange for your demands; and as security
for the payment of interest, and the gradual redemption of the
principal, the city shall annually, in January, levy a special tax
for that purpose to the amount of $650,000. The provisions were
designed to give value to the proposed bonds in the markets of the
country, and necessarily operated
Page 105 U. S. 288
as an inducement to the creditors to take them. When the bonds
were issued and taken by the creditors, a contract was consummated
between them and the city as fully as if all the provisions had
been embodied as express stipulations in the most formal instrument
signed by the parties. On the one hand, the creditors surrendered
their debts against the former municipalities, and, on the other
hand, in consideration of the surrender, the city gave to them its
bonds, which carried the pledge of an annual tax of a specified
amount for the payment of the interest on them, and ultimately of
the principal. The annual tax was the security offered to the
creditors; and it could not be afterwards severed from the contract
without violating its stipulations, any more than a mortgage
executed as security for a note given for a loan could be
subsequently repudiated as forming no part of the transaction.
Nearly all legislative contracts are made in a similar way. The law
authorizes certain bonds to be issued, or certain work to be done
upon specified conditions. When these are accepted, a contract is
entered into imposing the duties and creating the liabilities of
the most carefully drawn instrument embodying the provisions.
Von Hoffman v. City of
Quincy, 4 Wall. 535;
Hartwan v. Greenhow,
102 U. S. 672;
People v. Bond, 10 Cal. 563;
Brooklyn Park Company v.
Armstrong, 45 N.Y. 235.
There were other provisions in the act of 1852 besides those
stated, which, though not essential to the obligatory form of the
contract, were designed to inspire the creditors with confidence in
the punctual payment of the interest and principal. It declared
that all ordinances, resolutions, or other acts passed by the
council after the first day of January of each year should be null
and void, unless the ordinance imposing the consolidated loan tax
should have been previously passed. It also declared that after its
passage no obligation or evidence of debt of any description
whatever, except those therein authorized, should be issued by the
city or under its authority. Whatever legal force may be ascribed
to them, they were intended as solemn asseverations that the pledge
of the annual tax should never be violated.
The question then arises, was the act of 1852 valid? Its
Page 105 U. S. 289
invalidity is asserted, as stated above, on two grounds; the
first of which is that its object is not expressed in its title, as
required by article 118 of the Constitution of 1845. The title of
the act is "An Act to consolidate the City of New Orleans, and to
provide for the government and administration of its affairs." The
article of the constitution declares that "every law enacted by the
legislature shall embrace but one object, and that shall be
expressed in the title." A similar provision is found in several
state constitutions. Its object is to prevent the practice, common
in all legislative bodies where no such provision exists, of
embracing in the same bill incongruous matters, having no relation
to each other, or to the subject specified in the title, by which
measures are often adopted without attracting attention, which, if
noticed, would have been resisted and defeated. It thus serves to
prevent surprise in legislation. But it was not intended to forbid
the union of several different provisions in the same bill, if they
are germane to the general subject indicated by its title. A bill
to incorporate a city and provide for its government may, without
conflicting with the constitutional clause, contain provisions
relating to the various subjects upon which municipal legislation
may be required for the preservation of peach, good order, and
health within its limits, the promotion of its growth and
prosperity, and the raising of revenue for its government. So here,
under the title of the act in question, provisions might be
enacted, not merely relating to the union of the different
municipalities and the government of the city, but to all the
varied details into which the general administration of its affairs
might lead. The municipalities were in debt at the consolidation,
and this was well known to the legislature. A change in their
government, and in the administration of their affairs, required
some disposition to be made of their debts. Whatever interests were
possessed by them were the proper subjects of legislation in the
act which took them out of existence as separate municipalities and
created a new corporation in their place, with power to deal with
their affairs. We hold, therefore, that the act of 1852 was not
invalid, on the ground that its object is not sufficiently
expressed in its title.
Page 105 U. S. 290
The second ground of objection to the validity of the act of
1852 is that the tax prescribed is to be levied upon real estate
and slaves to the exclusion of personal property, and in each
municipality in proportion to its indebtedness, which, as
contended, violated the rule of equality and uniformity required by
the Constitution of 1845. The language of the act is that
"The common council shall annually, in the month of January,
pass an ordinance to raise the sum of $600,000, by a special tax on
real estate and slaves, to be called the consolidated loan tax, and
the rate percent of said tax in each municipality shall be in
proportion to the indebtedness of each."
This amount, as already stated, was, upon the annexation of the
City of Lafayette, increased to $650,000. On the passage of this
act, Feb. 23, 1852, the Constitution of 1845 was in force. The
Constitution of 1852 was not adopted until July of that year.
Article 127 of the Constitution of 1845 is as follows:
"Taxation shall be equal and uniform throughout the state. After
the year 1848, all property on which taxes may be levied in this
state shall be taxed in proportion to its value, to be ascertained
as directed by law. No one species of property shall be taxed
higher than another species of property of equal value on which
taxes shall be levied; the legislature shall have power to levy an
income tax, and to tax all persons pursuing any occupation, trade,
or profession."
This article has been frequently before the supreme court of the
state for construction, and until the decision of the present case
the requirement of equality and uniformity in the tax has been held
to apply only to taxes levied for state, and not to those levied
for municipal, purposes. The first case was
Second Municipality
of New Orleans v. Duncan, 2 La.Ann. 182. That municipality had
passed an ordinance imposing a special tax of one percent on all
real estate within its limits, for the purpose of paying its debts
and providing for the support of schools; and objection was taken
to its constitutionality on two grounds: 1st, that the power of
taxation was vested exclusively in the legislature, and could not
be delegated to the municipality; and, 2d, that the taxation
authorized impinged upon the rule that no one species of property
should be unduly assessed. Both grounds were supposed to derive
support from
Page 105 U. S. 291
the article of the Constitution in question -- the first,
because, as contended, the equality and uniformity required
throughout the state were only obtainable by confining the exercise
of the power of taxation to the legislature, whose authority was
coextensive with the territorial limits of the state, and the
second, from the inhibition against taxing one species of property
higher than another. But the court replied, speaking through its
Chief Justice:
"The article by its terms applies to state, and not to
municipal, taxes. It provides for equality and uniformity of
taxation throughout the state. . . . The framers of the
Constitution had before them the condition of the municipalities of
New Orleans, with their debts, their abuses, and their wants; and
their corporate existence is recognized and continued, as to
certain public rights, by an express provision. The jurisprudence
under which the present system of taxation had grown up was before
them, and the power of remedying the evils of misgovernment was
left
in statu quo, with the legislature; and the
convention confined itself to providing for the state government,
leaving the municipal bodies, as it is believed sound policy
justified, under legislative control."
And referring to the admission made in the record that there was
no special ordinance of the municipality assessing taxes on
personal property, the court added:
"We know of no reason imperative on the municipality to impose
their taxes in any particular form, or to include any other species
of property in an ordinance imposing a tax on real estate. It
constitutes no objection, under any view of the subject, to the
validity of this tax, that personal property was not also taxed by
special ordinance."
This case was decided in 1847, and it is objected that it arose
before that part of the article went into effect, which declares
that "no one species of property shall be taxed higher than another
species of property of equal value on which taxes shall be levied."
It is doubtful whether this objection be correct in point of fact,
but assuming it to be so, the requirement of equality and
uniformity was in force; and the part cited does not require that
taxation shall be universal. It simply requires that when different
kinds of property are taxed, the rate of taxation shall be the same
on all. The construction
Page 105 U. S. 292
given was afterwards affirmed by the same court in
City of
Lafayette v. Cummins, 3 La.Ann. 673, decided in 1848. There
the question was as to the validity of a municipal tax on the trade
and occupation of the defendant as a butcher, levied under an
ordinance of the city passed in 1847. There were other trades and
occupations not embraced in the ordinance, and, consequently, not
taxed. It was therefore contended that the imposition of the tax
was contrary to that clause of the article of the Constitution
which provides for the equality and uniformity of taxation
throughout the state. But the court replied that
"in the case of
Duncan v. Second Municipality, this
question, after very thorough argument, was determined by this
court, and the article was held applicable only to state, and not
to municipal, taxes."
It is said in answer to this decision that the language of the
court was a mere dictum. We do not so regard it. The point of
contention in the case was whether the equality and uniformity
applied to taxation on occupations and trades as well as on
property. The answer which met the objection to the taxation on
real property exclusively was held to meet the objection to
taxation on certain occupations to the exclusion of others.
The Constitution of 1852 contained a similar clause -- identical
in language, omitting the words "after the year 1848" -- and with
one exception, subsequently reversed, it has received a similar
construction from the supreme court of the state. The case referred
to was that of
Municipality No. 2 v. White and Others,
which arose in 1854. 9 La.Ann. 446. The municipality had imposed a
tax on the owners of property contiguous to a newly opened street,
to pay the expenses of opening it, under a law which authorized the
apportionment of the cost in such cases upon the owners of adjacent
property, according to the benefit derived from the improvement.
The court was of opinion that the law was liable to the objection
that the tax was not equal and uniform, as required by the clause
in question, and held it to be unconstitutional. The decision was
in conflict with that in
Duncan's Case, but it was
rendered by a divided court, and in
Yeatman v. Crandall,
which arose in 1856, it was overruled. In the latter case, the
plaintiff sought to enjoin the collection of a levee tax, which was
imposed on
Page 105 U. S. 293
certain alluvial lands on the ground that the statute
authorizing it was unconstitutional in that it violated the rule of
equality and uniformity prescribed by the article in question. But
the court said:
"This article refers to state taxation, in its proper sense, for
general or state purposes. When it says that taxation shall be
equal and uniform throughout the state, it points directly to its
object, which is to regulate the mode of filling the state
treasury. It does not take away the power of making local
assessments for local improvements, upon the equitable principle
that he who reaps the benefit must bear the burden. . . . It is
notorious that an acre of land pays twice as great a tax for local
purposes in one parish as an acre of equal value pays in another
parish. Yet no one thinks the constitution infringed by such a
state of things."
11 La.Ann. 220.
By this decision the doctrine of the earlier cases, upon the
clause in the Constitution of 1845, was reestablished, and one of
the judges, who had concurred in the decision in the
White
case, stated that he had been led to reconsider his opinion and
that he yielded his former impressions on this point the more
readily because the Supreme Court which sat under the Constitution
of 1845, and five of the seven judges with whom he had sat upon the
bench, had concurred in holding that the article in question was
not intended to apply to municipal or local taxation for local
improvements.
The doctrine of this case was affirmed the same year in
Surgi v. Snetchman, 11 La.Ann. 387, and again in 1859 in
Wallace v. Shelton, 14 La. 498. In its opinion in the
latter case, the court said that the questions in the
Yeatman case were decided upon full consideration, after
having the aid of the arguments of learned counsel in that case,
and also in another case then under consideration on a rehearing,
and were subsequently affirmed in the two cases mentioned, and
added that "after these decisions, which were in conformity with
those under the Constitution of 1845, we had hoped the question
would be considered as at rest."
The objection to the want of equality and uniformity in the
taxation authorized by the act of 1852, in that it was to be levied
on the property of the different municipalities in proportion
Page 105 U. S. 294
to the indebtedness of each, does not strike us as possessing
much force. The debts created by the municipalities were separate
and different in amounts, and before the consolidation the taxes
upon the property in them, must necessarily have been assessed at
different rates. There was no obligation upon the legislature to
relieve either of them from the unequal burdens consequent upon the
different amounts of their indebtedness. The subject was one
resting in its discretion. Nor was it an unreasonable provision,
when authorizing the city to issue its bonds for the indebtedness
of them all, to require that taxation to raise the funds for their
payment should be thus apportioned.
From the extended reference to the adjudications of the Supreme
Court of Louisiana, upon the Constitution of 1845, requiring
uniformity and equality in taxation, there can be no serious
question as to the validity of the act of 1852, so far as the
consolidated bonds of the City of New Orleans are concerned, and
the provisions made by it and the supplementary act for the annual
levy of a tax of $650,000 to pay the interest and reduce the
principal. The decisions upon the clause of the Constitution of
1852 are corroborative of the correctness of the construction
originally placed upon the clause of the Constitution of 1845.
Whether such a construction was a sound one is not an open question
in considering the validity of the bonds. The exposition given by
the highest tribunal of the state must be taken as correct so far
as contracts made under the act are concerned. Their validity and
obligation cannot be impaired by any subsequent decision altering
the construction. This doctrine applies as well to the construction
of a provision of the organic law as to the construction of a
statute. The construction, so far as contract obligations incurred
under it are concerned, constitutes a part of the law as much as if
embodied in it. So far does this doctrine extend that when a
statute of two states, expressed in the same terms, is construed
differently by the highest courts, they are treated by us as
different laws, each embodying the particular construction of its
own state, and enforced in accordance with it in all cases arising
under it.
Christy v.
Pridgeon, 4 Wall. 196, and
Shelby v.
Guy, 11 Wheat. 361. The statute as thus
Page 105 U. S. 295
expounded determines the validity of all contracts under it. A
subsequent change in its interpretation can affect only subsequent
contracts. The doctrine on this subject is aptly and forcibly
stated by the Chief Justice in the recent case of
Douglass v.
County of Pike, 101 U. S. 677,
101 U. S. 687.
"The true rule," he observes,
"is to give a change of judicial construction in respect to a
statute the same effect in its operation on contracts and existing
contract rights that would be given to a legislative amendment --
that is to say make it prospective, not retroactive. After a
statute has been settled by judicial construction, the construction
becomes, so far as contract rights acquired under it are concerned,
as much a part of the statute as the text itself, and a change of
decision is, to all intents and purposes, the same in its effect on
contracts as an amendment of the law by means of a legislative
enactment."
See also Gelpcke v. City of
Dubuque, 1 Wall. 175;
Havemeyer
v. Iowa County, 3 Wall. 294;
Thomson v.
Lee County, 3 Wall. 327;
Lee County
v. Rogers, 7 Wall. 181;
Chicago v.
Sheldon, 9 Wall. 50;
Olcott v.
The Supervisors, 16 Wall. 678;
Fairfield v.
County of Gallatin, 100 U. S. 47.
We refer to this doctrine not from any doubt as to the
correctness of the construction of the article of the Constitution
of 1845 given by the Supreme Court of the state, but in answer to
the objections of counsel and the position of the court below. We
are of opinion that the construction given was correct. It is
impossible to apply to the varying wants of a municipality the rule
invoked with reference to taxation for state purposes on property
throughout the state, without producing the very inequality which
that rule was designed to prevent. There would often be manifest
injustice in subjecting the whole property of a city to taxation
for an improvement of a local character. The rule that he who reaps
the benefit should bear the burden must in such cases be applied.
The same construction of a similar clause in the constitutions of
other states has been adopted by their highest courts. The
Constitution of Virginia of 1850 prescribed that
"Taxation shall be equal and uniform throughout the
Commonwealth, and all property, other than slaves, shall be taxed
in proportion to its value, which shall be ascertained in such
manner as may be prescribed by law, "
Page 105 U. S. 296
and the Court of Appeals of the state held that the provision
related solely to taxation for purposes of state revenue, and did
not apply to taxes by counties and corporations for local purposes.
Gilkeson v. The Frederick Justices, 13 Gratt. (Va.) 577.
The Constitution of Arkansas of 1836 provided that
"All property subject to taxation shall be taxed according to
its value, that value to be ascertained in such manner as the
General Assembly shall direct, making the same equal and uniform
throughout the state,"
and the supreme court of the state held that the provision was
intended to apply to state revenue, and was not applicable to taxes
levied for county purposes.
Washington v. The state, 13
Ark. 752.
See also McGehee v. Mathis, 21 Ark. 40.
That taxation for state purposes, to be equal and uniform within
the meaning of the Constitution of 1845, need not have been
universal is a proposition which calls for no argument. It was only
necessary that all property on which taxes were levied -- not all
property in the state -- should be taxed according to its value and
in conformity with some fixed rate or mode.
State v.
Lathrop, 10 La.Ann. 398;
New Orleans v. Commercial
Bank, 10 La.Ann. 735.
The validity of the consolidated debt of New Orleans, and the
obligation of the city to provide for the payment of the interest
and the redemption of the principal, were never questioned by the
legislative department of the state until 1876, but were repeatedly
and in the most emphatic manner recognized and affirmed. In
fourteen acts of the legislature passed prior to that year, the
consolidated bonds are referred to as valid obligations of the
city, though in one of them, it is true, a different mode of
raising the tax from that specified in the act of 1852 is required,
and in another the levy and collection of the tax are postponed for
two years. Thus, the act passed in 1856 amending the charter
provides that the common council shall in each year levy an equal
and uniform tax upon all property in the city, real and personal,
but that said tax, added to the consolidated loan tax and other
taxes designated, shall not in the aggregate be more than one
dollar and a half on one hundred dollars of valuation, except in
case of invasion, "provided it be sufficient to pay the interest on
the consolidated debt and
Page 105 U. S. 297
railroad bonds issued by the City of New Orleans." In the mode
thus prescribed, the amount stipulated by the act of 1852 was
annually raised and applied until 1874 without objection from the
bondholders. Hence it is contended that they waived their right to
the special tax mentioned. But no such inference can be justly
drawn from their silence. They could not complain so long as the
amount prescribed was raised and applied as stipulated. Had the
requisite funds been given to the city, and then applied to pay the
interest on the bonds, and to purchase with the residue such of
them as had the shortest time to run, the bondholders would have
been equally without cause of complaint, and would as little have
waived by their silence the right to insist upon the special tax if
a resort to it should become necessary. Nor is their right in that
respect affected by the fact that, since 1852, slavery has been
abolished, and that there are no longer slaves upon whom taxation
can be levied. The obligation of the city to raise the required
fund by special tax on real estate still remains. That is no more
lessened than it would be by the destruction of any other portion
of the taxable property, although the rate of taxation on what is
left might be thereby increased.
The act of 1874, which postponed the levy and collection of the
tax for a sinking fund for the purchase of bonds of the city until
December, 1876, also declared that the act should in no wise be
construed to hinder, delay, or affect the prompt payment of the
interest on them as they matured. The validity of the consolidation
bonds was
"recognized in all its integrity, it being the object of the act
to afford temporary relief to the taxpayers of New Orleans in the
embarrassed condition of its affairs, and not to detract from or
impair the rights of the holders of said bonds."
But notwithstanding this declaration of the validity of the
consolidated debt and the inviolability of the provisions for its
payment, no tax was subsequently raised to pay the interest or to
retire the principal. And before the time arrived to which the
postponement of a levy was made, new light respecting the
obligations of the city and the rights of the bondholders had
dawned upon the city authorities. Although for twenty-two years all
departments of the state government had recognized
Page 105 U. S. 298
the validity of the bonds, and the annual interest had been
regularly paid, and more than half of them retired, it was then for
the first time discovered that the act of 1852, authorizing the
issue of the bonds, was invalid, that its object was not
sufficiently stated in the title, that the tax prescribed was
neither equal nor uniform, and therefore was in conflict with the
constitution. The outcome of these new notions was the Premium Bond
Act of March 6, 1876, passed by the legislature at the solicitation
of the municipal authorities.
This act is a most remarkable piece of legislation. So far as
the consolidated bonds are concerned, it amounts to little less
than open repudiation of the city's faith. It admits that the debt
of the city as established by law is so large as to require for its
liquidation taxation on property within its limits at the rate of
at least five percent, and yet authorizes a tax of only one and a
half percent to pay the expenses of the city government, and to
meet the obligations which are offered in exchange for those
bonds.
It recites 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 percent per annum to liquidate the debt;
that the levying of a tax at so exorbitant a rate 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 practical
bankruptcy, and that the council of the city have 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 wellbeing and the maintenance of the public
honor."
The plan proposed was to exchange all recognized and valid bonds
of the City of New Orleans and of the Cities of Jefferson and
Carrollton for bonds to be known as premium bonds of the city, the
latter to be of the denomination of twenty dollars and dated Sept.
1, 1875, each bearing five percent interest from July 15 of that
year, the interest and principal to be paid at the same time and
not separately, and that time to be determined by chance in a
lottery. One million of these
Page 105 U. S. 299
bonds was to be divided into ten thousand series of one hundred
bonds each. The ten thousand series were to be placed in a wheel,
and, in April and October of each year, as many series were to be
drawn as were to be redeemed, according to a certain schedule
adopted. The bonds composing the series thus drawn were to be
entered for payment three months thereafter, principal and
interest, and were 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 were to be placed in a
wheel and 1,176 prizes, amounting to $50,000, were to be drawn and
distributed. Under this plan, the city was to be released from
payment of the principal and interest of its debt, except such
portion as might be drawn in the lottery each year. Under this
arrangement, it would depend upon the turn of a wheel and the
drawing of a fortunate number whether a creditor would be paid in
one year or in fifty years. The plan completely disregards all the
conditions upon which the consolidated bonds were issued, and
postpones indefinitely the payment of interest and principal, or
rather leaves the time of payment within fifty years to be
determined by chance.
The act of 1852, as we have stated, declares that the city
council shall, in January of every year, pass an ordinance for the
levy and collection of a special tax to be applied to the payment
of the interest on the consolidated bonds and to retire the
principal. The act of 1876 declares that no tax shall be levied by
the city council that year or any year afterwards to pay the
principal or interest on those bonds or on any other than the
premium bonds. The act of 1852 declares that all ordinances,
resolutions, and acts of the city council of any year shall be null
and void unless the ordinance imposing the special tax designated
shall have been previously passed. The act of 1876 declares that
all laws requiring or authorizing the city council to levy any tax
for bonds or interest on bonds other than premium bonds are
repealed, and, as if that was not sufficient evidence of the
repudiation of former obligations, it forbids the courts to issue a
mandamus to the officers of the city to levy and collect any
interest tax other than for those bonds.
Page 105 U. S. 300
To meet the interest on them and for all other purposes of the
city, the act further provides that a tax of only one and one-half
percent per annum shall be levied, and this limitation of the
taxing 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."
If the provisions of this act nullifying the pledges of the act
of 1852 are valid, the consolidated bonds are virtually destroyed;
no taxation is allowed to raise funds for them; their payment,
therefore, would be so uncertain as to render them practically
valueless. The chance with premium bonds offered in their place of
a favorable turn of the wheel in a lottery would be a poor
substitute for the levy of an annual tax for the payment of
interest and principal. We shall not waste words upon the scheme
thus developed to evade the just obligations of the city.
Notwithstanding the declaration in its preamble, that the act seeks
from the creditors the indulgence necessary "for the public
wellbeing and the maintenance of the public honor," it is, so far
as the consolidated bonds are concerned, tainted with the leprosy
of repudiation. It says to the creditors:
"Take these premium bonds, and trust for payment within fifty
years to your fortune in the lottery we offer; no other way is left
open to obtain a possible payment. No tax can be levied for your
benefit. No compulsory writ can issue from the courts. Take these
bonds or take nothing."
The primal duty of the city authorities to fulfill punctually
their obligations and maintain good faith is thus proclaimed to be
no duty at all.
We do not deny that the power of taxation belongs exclusively to
the legislative department of the government, that the extent to
which it may be delegated to municipal bodies is a matter of
discretion, and that in general the power may be revoked at the
pleasure of the legislature. But, as we said in the case of
Wolff v. New Orleans, decided at the last term,
legislation revoking the power is subject to this qualification,
which attends all state legislation, that it
"shall not conflict with the prohibitions of the Constitution of
the United States,
Page 105 U. S. 301
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. . . . 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. The Court there
said
"that when 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 inhibition upon the courts of the state to issue a mandamus
for the levy of a tax for the payment of interest or principal of
any bonds except those issued under the premium bond plan was a
clear impairment of the means for the enforcement of the contract
with the holders of the consolidated bonds. When the contract was
made, the writ was the usual and the only effective means to compel
the city authorities to do their duty in the premises, in case of
their failure to provide in other ways the required funds. There
was no other complete and adequate remedy. The only ground on which
a change of remedy existing when a contract was made is permissible
without impairment of the contract is that a new and adequate and
efficacious remedy be substituted for that which is superseded.
Here, no remedy whatever is substituted for that of mandamus. The
holders are denied all remedy.
Louisiana v. New Orleans,
102 U. S. 203
102 U. S.
207.
Page 105 U. S. 302
Legislation of a state thus impairing the obligation of
contracts made under its authority is null and void, and the courts
in enforcing the contracts will pursue the same course and apply
the same remedies as though such invalid legislation had never
existed. The act of March, 1876, cannot, therefore, be permitted to
restrict the power of the city authorities to levy the tax
stipulated by the act of 1852 to pay the interest on the
consolidated bonds issued thereunder, and to retire the bonds.
It follows from the views expressed that the judgment of the
Supreme Court of the state of Louisiana must be reversed, and the
cause be remanded to that court with instructions to reinstate the
same and to remand it to the Third District Court of the Parish of
Orleans, or its successor, to carry into effect the provisions of
the thirty-seventh section of the Act of the legislature approved
Feb. 23, 1852, and the fifth section of the supplementary act
approved the same day, embraced in Nos. 71 and 72 of the acts of
that year, as containing a valid contract between the City of New
Orleans and the creditors holding the bonds issued under them, and
to direct the district court to issue a mandamus to the City of New
Orleans and its authorities annually to levy and collect the tax of
$650,000 directed by the acts and to apply the same in the
following order: first, to the payment of the current interest of
the year; secondly, to the payment of arrearages of interest of
former years until all the arrearages are satisfied, and thirdly,
to the purchase of bonds having the shortest period to run.
Judgment to this effect, and that the defendants pay the
costs in this court and in the Supreme and District Courts of
Louisiana, will be entered.
