Court Opinion

ID: 6252231
Source: CourtListenerOpinion
Date Created: 2022-02-17 21:18:51.601657+00
Date Added: 2024-06-11T08:59:27.082722
License: Public Domain

Dissenting Opinion by
Mr. Justice Elkina
I must be in error, as the court has so decided, but not being convinced of the error, and since the debt creating *300power of bodies corporate under the Constitution throughout the entire State may be indirectly involved, I deem it proper, to state a few reasons to sustain the faith that is in me. The subject matter involved is the borrowing capacity of the City of Philadelphia under the Constitution, and the decision depends upon the proper ascertainment of the net indebtedness under the Act of 1874. Whether the city is attempting to borrow too much money to provide for permanent improvements, or not enough for the proper development of a progressive municipality, are questions for the people to determine and not for the courts to decide. When courts are asked to determine what the borrowing capacity of a city is, they must look to the Constitution and statutes as their guide in arriving at a just decision. Hence, our first inquiry must necessarily be, what limitation has been placed upon the power of cities or other bodies corporate to create indebtedness by our Constitution? The answer will be found in Article IX, Section 8, which provides, inter alia, as follows: “The debt, of any county, city, borough, township, school district, or other municipality or incorporated district, except as herein provided, shall never exceed seven per centum upon the assessed value of the taxable property therein.” It will be noticed that the limitation on the power to create indebtedness is made to apply in the express language of the Constitution to each separate political sub-division, or body corporate; and not to all of the sub-divisions, or bodies corporate, collectively. This means that a county can create for county purposes an indebtedness not to exceed seven per centum of the assessed value of its taxable property; that a city can create an indebtedness for municipal purposes not to exceed seven per centum of the assessed value .of the taxable property within the city; and that a school district can likewise create an indebtedness for school purposes not to exceed the constitutional limitation. It is now forty years since *301the adoption of the Constitution, and so far as I am advised, no one has ever seriously questioned the power of each separate district enumerated in the organic law to create an indebtedness not to exceed the seven per centum limitation, unless the legislature still further limited a particular class of districts to a less borrowing capacity than the Constitution permits, which the law making body has the power to do. This is true of the School Code which limits the debt creating power of a school district of the first class to two per centum of the assessed value of the taxable property therein. The limitations of the Constitution apply to the city, and to the school district of Philadelphia, just as they do to all other cities and school dstricts of the Commonwealth. The Constitution is in force throughout the entire State, and applies to all districts of the same class precisely in the same manner, no matter where located. Each separate body corporate, enumerated in the Constitution, has the power to create an indebtedness not to exceed seven per centum of the assessed value of the taxable property therein. As an illustration, the City of Pittsburgh has a borrowing capacity for municipal purposes of seven per centum of the assessed value of the taxable property in the city, and the County of Allegheny has likewise a separate borrowing capacity for county purposes of seven per centum upon the assessed value of the taxable property in the county. It is also true, that in determining the borrowing capacity of the City of Pittsburgh for municipal purposes, the indebtedness of Allegheny County is not taken into consideration; and in determining the net indebtedness of the county, the municipal indebtedness of the city is not included. The county and the city are separate bodies corporate, each of which has the power to create an indebtedness within the constitutional limitation, without reference to the other. This is no new doctrine, but one which has had the sanction of the legal profession in our own State since the adoption of the Constitution, and the approval *302of almost every jurisdiction in which the question has been raised. Mr. Dillon in his valuable work on Municipal Corporations states the rule as follows: “The limitations of the Constitution as generally expressed on indebtedness are to be taken and understood distributively and not collectively. The prohibition unless otherwise expressed or provided, is aimed at each of the organizations, or political sub-divisions, or bodies corporate, separately; the indebtedness of a county plays no part in determining the existing indebtedness of a city, town or village which forms a part thereof, and vice versa.” Of the numerous authorities which sustain this doctrine the following may be cited: Ex Parte Newport, 37 L. R. A. (N. S.) 1034; State v. Common Council of Tomahawk, 96 Wis. 73; Todd v. Laurens, 48 S. C. 395; Campbell v. Indianapolis, 155 Ind. 186; Wilson v. Board, 133 Ill. 443; Huron Board of Education v. Life Ins. Co., 94 Fed. Repr. 324; Kennebec Water Dist. v. Waterville, 96 Me. 234; Tuttle v. Polk, 92 Iowa 433. As applied to the present case this means that the City of Philadelphia at the present time has a borrowing capacity of seven per centum of the assessed value of the taxable property therein for municipal purposes; and that the school district of Philadelphia has a borrowing capacity of two per centum of the assessed value of the taxable property within the district for school purposes, and this is so because the School Code thus limited its borrowing capacity. It is not open to doubt that the City of Philadelphia can act independently of the school district in ere-, ating indebtedness for municipal purposes, and that the school district can act independently of the city in creating an indebtedness for school purposes. With this understanding of the law let us see how the present case stands. The School Code created a school district of the first class within the territorial limits of the County of Philadelphia. It conferred upon the school district thus created the powers and privileges of a corporate entity. The legislature clothed the school district with *303power to make contracts, to incur obligations, to create indebtedness for school purposes, and to provide a sinking fund for the payment of indebtedness and the liquidation of bonds, the payment of which was assumed when the school property of the city was taken over by it for school purposes For the maintenance of the public schools and for the payment of debts created or assumed, the school district was given the power to levy and collect taxes just the same as a county or a city is given the power to levy and collect taxes for county or municipal purposes. The Board of Education, acting for the school district under the power conferred by the legislature, took over the school property of the city and agreed to assume, and in fact did assume, the payment of $6,524,216.57 of the bonded indebtedness of the city, which sum represented what was considered an equitable share of the public burdens! to be borne by the school district in consideration for the valuable assets and property transferred to it. The school district, therefore, had transferred to it as a separate body corporate, all of the school property, formerly owned by the city, and as a consideration for the transfer, assumed the payment of the amount above stated. Why is not this a valid contract binding upon both parties ? Neither the city nor the school district- denies the validity of the contract nor the binding obligations thus imposed by law and covenant. The school district is not attempting to evade its liability for the payment of the bonded indebtedness assumed by it, and the city is content with the situation. As between these two separate bodies corporate the obligation of the school district is considered binding, and no one doubts either the willingness or the ability of the school district to meet its obligations at maturity. There is not the slightest doubt but that the school district will pay out of the school revenues the $6,524,216.57, the payment of which it assumed when the school property was taken over. It seems to me that every fair minded person must concede the cor*304rectness of these statements. This, then, brings us to the consideration of the practical question in the case. Is the school district of Philadelphia a solvent debtor within the meaning of the Act of 1874? This act provides that the net amount of the indebtedness of a municipality or other incorporated district “shall be ascertained by deducting from the gross amount thereof all moneys in the treasury, and all outstanding solvent debts, and all revenues applicable within one year to the payment of the same.” Is the school district of Philadelphia a solvent debtor, and is its obligation to pay $6,524,216.57 a solvent debt? If so, this amount should be deducted from the gross indebtedness of the city in ascertaining its net indebtedness under the Act of 1874. Who says that the school district of Philadelphia is not a solvent debtor, or that debts created or assumed by it are not solvent debts? No one in interest. It would be a distinct shock to the Board of Education, and to the patrons of the public schools, to be told that the school district was insolvent and could not pay its legal obligations. Why cast a doubt upon the obligations of the school district by a labored attempt to show that it is not a solvent debtor and cannot pay what it is legally bound to pay? Of course the school district is solvent, and of course it can and will pay what it agreed to pay, and this as between the city and the school district makes the latter a solvent debtor, and the indebtedness assumed by it, a solvent debt, within the meaning of the Act of 1874. I entirely agree with the contention of learned counsel on both sides of this case, that the gross indebtedness of the city should include the item of $6,524,216.57, because the bonds were issued by the city, and the city is therefore primarily liable for their payment, but in ascertaining the net indebtedness of the city I would deduct this item from the gross indebtedness because the city has a solvent debtor upon which it relies, and can rely, to pay this amount of indebtedness as the bonds mature.
*305There is a further and practical reason why this view should prevail. No matter how our views differ in other respects, we all agree that the item of f6,524,216.57, must be charged against the school district in ascertaining its borrowing capacity. If the item be charged against the city in the present instance, and no deduction be made because of the obligation of the school district to pay it, and the same amount of indebtedness be charged against the school district in determining its borrowing capacity, both districts will be charged with the same indebtedness, and the borrowing capacity of each will be reduced by this amount, although there is but a single indebtedness covered by the item in question. In the absence of any constitutional or statutory requirement making such a construction necessary, no such rule should be adopted. The item involved represents a single indebtedness, which as regards the bondholders the city is primarily liable to pay, but as between the city and the school district, the latter is bound to pay, and will pay, and therefore the school district is a solvent debtor upon which the city can call to meet its obligations.
It is too late to even question the validity of the Act of 1874 on constitutional grounds. For forty years the profession throughout the State have accepted it as a valid binding act and municipal indebtedness to the extent of millions of dollars has been created upon the strength of its provisions. This court has also settled the question beyond the peradventure of doubt: Bruce v. Pittsburgh, 166 Pa. 152; Elliot v. Philadelphia, 229 Pa. 215. Nothing can be gained now by attempting to disturb what must be considered a settled question of law. It is true that the courts have not been called upon to precisely define what is meant by the words “solvent debts” within the meaning of the Act of 1874. To my mind a debt is an obligation to pay, and if the debtor is solvent and able to pay his obligation, he is a solvent debtor, and his obligation to pay is a solvent debt, within any reasonable meaning of the term. The school dis*306trict of Philadelphia is able to pay its obligations and is therefore a solvent debtor, and its obligation to pay $6,-524,216.57, is a solvent debt within the meaning of any fair interpretation of the Act of 1874. This indebtedness will be paid by creating a sinking fund for the purpose, in the same manner as the city creates a sinking fund to pay its indebtedness. Already the school district has paid into the sinking fund about $600,000 under its contract with the city, and will continue to meet its obligations in this respect until its indebtedness is fully paid. Under such circumstances it seems trifling with the meaning of words to say that the school district is not a solvent debtor and that its obligation to pay is not a solvent debt. If the obligation of the school district is a solvent debt, the express provisions of the Act of 1874 require it to be deducted in ascertaining the net indebtedness of the city.
It is suggested that the legislature might repeal the school code without making any provision for the payment of indebtedness created or assumed by the school district, and in such event, the City of Philadelphia would have no recourse against the school district. It could just as well be said that the legislature might repeal what is known as the Bullitt Act, and all other acts relating to the city, and by so doing, strike down the entire municipal government and take away from it its power to levy and collect taxes and to incur and pay municipal indebtedness. But such suggestions are not in keeping with the spirit of our people and such a method of repudiating indebtedness and destroying public credit is foreign to Pennsylvania. Of course the legislature would do no such thing without making ample provision for the payment of all honorable obligations. I would sustain the position taken by the learned city solicitor and allow a deduction of the amount assumed by the school district from the gross indebtedness of the city.
With the greatest respect for the views of my asso*307ciates who do not agree with me, I would sustain the authorized loan of $8,600,000.00 and dismiss the hill.
Mr. Justice Stewart joins in this dissent.