New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1879-02-13
TBE CASE OF MEMPHIS.

servant.
THE CASE OF MEMPHIS.
The decision of Judge Baxter, of the United
States District Court, in the case of the late
City of Memphis. may prove a precedent in
hundreds of cases. The city having obtained
a repeal of its charter 10y application to the
LEGISLATURE, creditors representing S2,0OO,OOO
in bonds Immediately applied to the United
States Court for relief. That such relief in
some form would be promptly given was con-
tidently anticipated, in recent remarks on the
subject, bur the form adopted 10y Judge BaX-
ter suggests some inquiries of very wide
application. What j, to prevent the appoint
ment of a receiver for any and every city,
town OF county. that will not or cannot pay
its debts? If nonresident creditors apply to
United States Courts for relief in that form,
on what ground can il be refused 7
Cities are corporations created by state leg
islation. 1t is true. Bat 50 are railroad COM
paues. and banks having State charters, and
insurance and trust companies. Corporations
of every other description, whenever they are
so managed that they cannot satisfy Just de-
mandS of creditors, are unhcSita,ngly seized
by the courts and managed for the b. nciit OF
creditors, until their just demands have been
met Whatever powers, functions or fran
chiSos the corporation has then pass into the
coatro of the court to he employed for the
benefit and protection OF the creditor aS long
and as far as may be necessary. What is the
reason municipal corporation should be cx-
emit from like treatment IL similar clrcn-
stances
The repeal of the charter by the Legislature
was not necessary to give the court power to
act. Nor did that repeal deprive the court OF
any power. 1t was simply a void and uncon-
stiuuonal act, because it attempted to impair
the obligation Of contracts between the cor
poiation of Memphis and It's creditors. All
powers which the city had to assess, to tax,
to enforce collections. to maintain ORDER to
protect life and property, and to punish
offences. were necessary franchises OF
tine corporation to enable 1t to meet
its contracts and repeal of any OF them was
as unconstitutional as a direct legislative alb
rogatIon of all contracts made Ivy the City of
Memphis. Those powers remain, 10 whatever
extent they may be needed for the enforce
lncnt OF contracts. They have not lapsed,
and cannot be destroyed, so long as the con-
tracts remain unsatisiied. but can be used to
tlClI lllIl extent IL u'CtSctIN lOI 'Ii' NHi'A''
ment of those contracts
Neither repeal of charter nor any other
spcca act of forfeiture is necessary to give
the courts jurisdiction. Years ago, the City
of Cape Girardcau, Mo-, attempted to cXtin-
guish its obligations by nOn-uscr of its char
ter But the United States District Court as
serted its power for the protection OF creditors
and was about to cause assessment ana levy
OF taxes to satisfy its judgments, when the
pcople came to their senses. But IT does not
appear that any particular mode or form OF re-
fusal 10 perform contracts Is necessary to bring
Il CORPORATION within the discretionary power of
the courts. The essential point, III the Memphis
case, and III the Cape GlTardcau case, and 1t
NAV he pr, Sumcd in any other is the absence
Of other legal remedy. If a creditor has
claim which the court holds just, and there Is
no other way of enforcing that claim. it GER
tainly seems that the court has the same
pover to appoint receiver for Il municipal
corporation as for a railroad or bank, and
the same power 10 use all the franchises of
the delinquent corporation for the satisfaction
of the claim
If this should he the decision of the United
States Courts, there would be a great change
IN the value of municipal securities now con-
.ldcrcd almost worthless. There are hun
drcd> of cities now in default Bond, amount
ing TO many millions. of unquestloDcd valid
ltv. are sleeping IN old trunks and vaults,
because the indebted municipalities have
found means OF eyading or defying other
processes for the rehcf OF creditors and
vet the franchise, embracing the power
to govern, assess and tax, is III every
case OF greater value than the entire
Indebtedness, for 1t can be so used as
to insure full pay ment OF every debt.
Probably there is not a case III this country
where payment OF municipal debt has be-
come actually impossible, SCI that a competent
receiver, armed by tHc courts with full power
f. assess and tax, and backed by United
states marshal, could not secure payment IN
full. But if the court has power, how long
will it be before the creditors will learn to
invoke that power wherever city or town is
i'm default