The record-union., 1891-02-11
JUDGE BEATTY'S POSITION.
History Of the Bond Litigation From
His Standpoint.
He Says He is Working for the Best
Interests Of the City and for
Lower Taxes.

UNION has heretofore treated the Funded
Debt Commissioners fsirly, and gener-
ally supported them in all discussions re-
garding the city debt, / trust I am not
asking too much when l request the
privilege of explaining my position in
regard to the Sprague bills and my rea-
son for that position.
In the first paragraph of your editorial
you say: "Under decision of the Su-
preme Court we were compelled a few
years ago to begin paying to the city
bondholders 55 per cent. of our gross
revenue; that is, SIS per cent. of one per
ent. for thegeneral fund, SO per cent. of
gross licenses, water rents, etc. Prior to
that, for some twenty years, we had paid
the 55 per cent. on the basis of net reve
nues." The word reuenWeS in the plural.
The Funding Act was passed in 1858. The
first payments hereunder were made
January, 1860. There was no attempt to
limit the payments made to creditors
hereunder to net TeUcalte. Fifty-fye per
cent. of the gross receipts of the water
rents, and of all other revenues, were
paid into the sinking and interest fund.
The same was done in 1861. Both those
years the fund was more than sufficient
and leave quite surplus each year to
buy up bonds.
May 20, 1861, bill was passed, not
explaining the word revenue" but
amending Section 30 of the Consolidation
Act Of 1858 and authorizing the city
authorities to use as much money derived
from water rents as is necessary to pay
the running expenses of the water works,
but not including in these expenses the
fees and salaries of officers. land the
balance, If any [my italicsl, shall be dis
tributed. = %'a The phrase net TeUe-
nae does not appear in the amended sec
ton. 1t is a simple assumption on the
part of the Legislature that they could
take away from the creditors a part OF
what had been secured to them by con-
tract with the city. In 1868 the CONSOLE
dation Act of 1858 was repealed, and the
new charter for the city, IN Section 26,
defined what the creditors should have
That section says they shall have 30 per
cent. OF net water rents; also, DC per cent.
of taxes, harbor dues, licenses and fines.
The net is not applied to any other part
Of the revenue except water rents. Nor
has 1t at any time ever been attempted or
claimed that the City Treasurer was only
bound to set apart the net revenue from
taxes, harbor dues, licenses or fines.
The litigation about 80 per cent. of
taxes arose from the fact that the Trustees
failed to levy the per cent. property tax
which the law of 1858 provided for, and
out of which the % per cent. of per cent.
was to be taken. There was no question
about net revenue or gross revenue in
that case.
In 1858 Sacramento was virtually in
solvent. She carried debt of 81 ,6OG, ,O00,
most of it bearing interest at 10 per cent
some at sc per cent, or 3 per cent. per
month. The terms offered to the cred
itorS in the Act OF 1858 was a sort of in
solvent debtor settlement. Most of the
creditors accepted the terms. One of the
creditors refused Mrs. Fowle) and sued
the city. She had claim, L think, of
$4,000 in bonds, besides interest She
sued and eventually recovered SS3, 900 ile
gold from the city, although it was paid
after the United States had made green
backs legal tender.
The Funding Act was very favorable
settlement for the city, and one she
should have honorably stood up to and
did stand up to for three years. During
that time not one of the able lawyers who
drew this bill for the city ever discovered
that the word revenue as applicable to
water rates meant net revenue. The first
time that idea was suggested was by
James McClatchy in 1879.
In the case of Meyer VS.. Brown, the
rights of the bondholderS as against the
city were under discussion. The court at
that time consisted Of seven Judges. An
opinion was rendered, concurred in by
six Of the Judges, the seventh being sick
and not acting in the case. In that
opinion the court holds that the Act of
1858, which provides for the issuance of
the bonds, and the acceptance of the
bonds hereunder constituted a ''con-
tract as solemn and binding and
as much beyond subsequent legislation
as it would have been if made between
private parties.''
In the year 1857 this same question that
was settled in the Meyer VS.. Brown came
again before the Supreme Court in the
case of Bates VS.. Porter. Judge Thornton
delivered the main opinion on the case in
which three other Judges concurred. In
this opinion Judge Thornton adopted the
opinion of the former case as settling the
principal point in the case. Upon the
new point that arose in this case whether
the word revenue, as applied to water
rates in the Act Of 1885, meant net revenue
or gross revenue, he held that it meant
gross revenue, and expressed the opinion
further that there was no ambiguity
about the word when construed in con-
nection with other language in the statute
Judge Paterson delivered a dissenting
opinion, in which two other Judges con-
CURED. In Judge Paterson's opinion he
does not dissent from that part of Judge
Thornton's opinion which adopts
the Meyer VS.. Brown decision as settling
the main point in the case, but himself
refers to the, Meyer VS.. Brown decision
with apparent approval. Upon the first
point in the case all the seven Judges
agree. On the second point in the case
the meaning Ofthe word revenue, Judge
Paterson only dissents from q part of
Judge Thornton's conclusion. He does
not pretend that Judge Thornton should
have held that the word revenue meant
net revenue. He does not intimate that
such was bis own opinion; on the con-
trary we may justly infer that had
he been called on to determine
which was the most probable meaning of
the word, he would have held the same
as Justice Thornton. But he would have
held that opinion with some doubts and
miSgivings. Speaking of the word
revenue, as used in the Act of 1853, he
says =" It is by no means clear that it was
intended to be thus used in the sense
claimed for it by appellants" But he
claims that, as the word was somewhat
ambiguous, the Legislature had right
to change the language of the Act and
make it more certain and intellioible
Now take this part of the opinion in CON
neetion with the opinion on the first
point--that the act and acceptance of the |
bonds made contract s'as much beyond
subsequent legislation as it would have
been if made between private persons',-
it leads to this conclusion: If two
parties make contract which is ambip-
uous and difficult to understand, instead
of going into court to have their rights |
determined under the contract, one party
may have bill drafted declaring the true
meaning OF the contract, get it passed BY
the Legislature, and save the court all
trouble about settling an uncertain con-
tract. That is what the city is trying to
do. The contract between this CITY and
the bondholders has been litigated and
every possible point in the case settled by
some half-dozen decisions within the last
ten years.