Memphis daily appeal. [volume] (Memphis, Tenn.) 1847-1886, 1869-03-27
FINANCES.
The Injunction ON Bonds Mod
iied.
opinion OF Chancellor smith
What is FunGfng."
Learned aud Interesting Dis
seEIafi0R.
$500 GOO in Bonds 10 be Issued
and used as Collateral.

$500 GOO in Bonds 10 be Issued
and uSed as Collateral.
The "Citize9s' Union 4" have come tC
grief again. Their Iast pet scheme fOI
hampsriBg the city finances, and keep
ing those to whom the city was justly
Indebted (the fremen, the street force,
and other employees, many Of whom are
in the GREATEST need cut OF their honest,
hard earned wages, has fallen to the
ground. Their Injunction" with
which they were going to kill the bonds
that they could not vote down, has been
made virtually q dead letter by the de-
cision of the Chancellor, rendered yester-
day, and which we present below. It is
an able do~cumeut-full OF interest and
replete with historical Information:
Harrington and others VS.. Mayor and Aldermen
of Memphis.
Before noticing the main question in
volved in this case, / will say that the
objection to the Jurisdiction OF the Court
is not well taken.
think it clear that citizens and tag
payers Of 8 city may epjOin the city au
thOrities from an illegal issuance of city
bonds, or an illegal use OF those already
issued. II the bonds get iRtO the hands
of bona tide holders the city may be
bound to pay them and, hence, the
the only practical remedy Of the tax
payers il 60 restrain the Illegal issuance
or use of the bonds. (S9e Adams VS.,
Memphis and Little Rock Railroad,
? Cold. 645.) II bonds irregularIy is
sued must pc paid, which ia in effect de-
cided 10 that case, it would seem to fol-
low that there should be a remedy to re-
strain the improper issuance Of them.
(Sse s's1 billiard on INJUNCTION, p. 3I5,
3I7, 49, Bat the real difficulty
Is TO ascertain the meaning Of the
act under which thess bonds are is-
sued. The bonds are to be Issued
% for the purpose OF funding the debt of
the city.'' The embarrassment and
doubt with which / acted when the bill
was presented to me for a fat, are appa-
rent to counsel from tie nat Itself. Ia
determining this question we can derive
but little aid from Law books. Il is a
financial ard not q legal question, and
one which L have never heretofore ex-
amiled or thought OF. Then, what is
meant by funding the debt Of the
city ?" What is the funding system d?
Looking briefly to its history, we find
that the earliest record Of n funding
system is in the history of Venice, in
l1FI. In that year q forced loan was
raiEed by the Duge OF the city, to meet a
pressing exigency aud five per cent.
was to be paid TO the citizens from whom
the losn was obtained. Florence, and
other Italian republics, prscticed the
system, anG it afterwards became gener-
al in Europe. Ills OBJ, 5ct is to provide
large sums OF money for b Immediate
e~Eigencies of the State, which it would
- fEa lnasEEFz m EE,Gn hu niFcRt faXa-
tion.n Il quote from BouvieIis Law
Dictionary 12lh Edition title Fund
ing System.''l
On questions of this sort We most nat
ursliy look to the history OF England
the country from which We derive our
language and laws, and most of cur ideas
OF government and finance. The sys-
tenn Of funding was not introduced into
thsG country until 1893, during the reign
CT William LII, B,fore that time the
revenue had besn raised by direct taxa
ten, and Tor some time principally by the
land tax. About this time it had become
impossible TO rsiss ths necessary revenue
by taxation, without exciting great dis
content, ana in Jsnusry, 1885, a bill vas
passed to raise a million pounds by lOSn.
This was The origin Of the great public
debt of England. The capital Of the cit
,g5Us sought investment IL this lgsB, rs
IL has is syeTy renewal Il it, the govern
ment promptly paying tae interest. This
system was followed, and loans taBeE,
from time to time, until in the year 1915
the Ro6ea debt of England was eight
hundred million. iEhus, ca the credit Of
the Government, this immense eaHa had
been raised. And this Aaceulsy called
." the funding system" LSee Mseaulsy's
EWsaF.ru 1F Lwnf.nh 1fh unfssnan mana
25i, ct stq.j Even on this financial
sal CT, usually esteemed dry, the h;sto-
~ Goes NOT lcse its charming language
and elegant dictiOp.
Recent American history is also in
strucLiye. Ualil the late civil war our
6uGncse had not troubled statesmen
much. But with ths EsK esme the
necessity for large sum5 OF money. Con
gress adjourned March 4tb, 1861, with
out having made any extraordinary pro-
visions for raising revenue. Before it
met al extra session, July Al, 1861, hos
tilitiss hSd begun. To raise sufficient
amount from the ordinary sources of
revenue wGs impossible, Hence loans
had 70 De resOrted to on the credit OF the
Government. These loans, it IL well
known, were raised on bonds; and usu-
ally, perhaps always, the loans were
taken under par. And this was " fund
ing the public debt" SOthe s ate Gov
ernments long before this period, had
used their credit for various purposes.
By the bends OF cur State, oHr railroads
nave been chiefly built.
From this brief historical sketch we
get an idea of funding. 1 had defined it
thus Using the credit of the Govern
mebt 10 gsise money to meet its necessi-
ffgo ard Tina nNoi1inu haauu fayofion
for pressing wants. But l have seen
B0UVier's def aition, which is clear and
comprehensive, snd strictly in scord-
ance with the history Of the system.
therefore adopt that defnltion, which is
as follows; 1.-The practiee o. borrow,
ing money TO defray the expenses of
Government" ~ Bouvier, 18th Ell, Ii
tie Funding system
1 cannot adopt ths definition quoted
from Chambers Encyclopedias nor
8 1 adopt that Of the counsel for
The compisinsnts, viz funding
is the taking up Of an OLD
debt, already payable, by sgbstitui Ing
new obligations, payable st a future day,
with interest" The Doge of Venice did
nOs so " fund.- in I'LL. Nor have the
Parliament Of England and the Ameri-
can Congress and Legislatures funded in
tAtS W1Hh6Es Anu we muSb GOuSlIu6 Luo
act Of the Legislature in controversy in
the light Of history.
Counsel insist that these city bonds
can only be used by substituting them,
dollar for dollar, for the evidences 0.
debt already existing against the city,
and now mature. spprehend that few
Of those creditors whose claims were so
pressing ss TO require the city to resort
to these extraordinary means, will agree
to exchange a debt now due for one on
the same debtor having thirty years. to
run; and the Legislature could hardly
have contemplated such an exchange.
And counsel eve go so far as to say,
that, II the city were to sail these bonds
at par, and pay its debts, dollar for dol
lar, this would not be funding the debt.
While this proposition is the legitimate
result of their reasoning, it seems to me
sufficient to show the fallaey of such
reasoning.
l do not deem 1t necessary to say more
OF the other propositions discussed than
that | think the Legislature could prop
srly confer on the city authority to issue
these bonds and that the city may use
them, IS such securities are ordinarily
used by other governments, for the pur-
pose OF raising or borrowing money TO
H. - ill