Court Opinion

ID: 6242304
Source: CourtListenerOpinion
Date Created: 2022-02-17 20:47:42.873552+00
Date Added: 2024-06-11T08:58:13.985554
License: Public Domain

Dissenting Opinion by
Mr. Chxee Justice Sterrett :
This taxpayer’s bill, brought against the city of Philadelphia, and the mayor and controller thereof, charges in substance :
(1) That the creation of the $6,'000,000 loan, authorized by the ordinance of March 15, 1894, will increase the debt of the city nearly $5,000,000 above the constitutional limit of “seven per centum upon the assessed value of the taxable property therein,” in violation of section 8, article 9, of the constitution.
(2) That about $3,000,000 of the proceeds of said loan is to be expended for the use and benefit of the Philadelphia & Reading Railroad Company in such way as to be in fact an appropriation of money for or a loan of its credit to said railroad corporation, in violation of section 7, article 9, of the constitution; and prays that said defendants be enjoined from placing said loan, etc.
In my opinion these charges are abundantly sustained, and the injunction, as prayed for, should issue on both grounds.
Section 8, of article 9, above referred to, declares: “ The debt of any .... city .... shall never exceed seven per centum upon the assessed value of the taxable property therein,” etc.
The history of this constitutional limitation and kindred provisions, among which is section 3, of article 15, ordaining that, “ Every city shall create a sinking fund which shall be inviolably pledged for the payment of its funded debt,” is too familiar to require extended comment. They were intended to remedy the then great and growing evil of excessive municipal indebtedness, and consequent oppressive taxation. The latter was the *136inevitable result of the former, and the obvious if not the only remedy was a reasonable limitation on municipal indebtedness. That was finally fixed at “ seven per centum upon the assessed value of the taxable property therein,” and became a part of the fundamental law. This limitation was of course intended for the protection of taxpayers, because the direct effect of the evil to be remedied was upon them. It was considered, by the framers of the constitution, that, in addition to taxation for the ordinary current expenses of municipal government, property owners should not be further taxed to any greater extent than is necessary to pay interest on a municipal debt, not exceeding the seven per cent limit, and to maintain a sinking fund pledged for the payment of said debt at maturity. For example, if the debt of a given city — upon which it is annually paying interest and also, maintaining a sinking fund for the purpose of paying the principal at maturity — amounts to “seven per centum of the assessed value of the'taxable property therein,” it has reached the ultimate limit of its borrowing power, and must remain in that condition pntil a borrowing margin is created by reduction of its funded debt or increase of its assessed valuation.
It is conceded that the present outstanding indebtedness of the city defendant is $52,578,845.22, or nearly up to the seven per cent limit. On every dollar of that sum it is not only paying interest, but, for the purpose of paying the principal of the several loans, at maturity, it is also making quarterly payments to the commissioners of the sinking fund, which fund the city, by contract with its loanholders, created and inviolably pledged to them for the payment of said loans at maturity. The fund thus created, and to the gradual increase of which the city bound itself to its loanholders, was committed to the custody and management of three persons called commissioners of the sinking fund, whose duty it is to invest and reinvest the same, etc., until the maturity of the corresponding loan, and then apply the same to the payment thereof-in full, if the fund be sufficient — if not, then pro rata. Said commissioners are, in fact and in law, trustees of the said fund and the securities which represent it, — trustees for both the city and its loan-holders, but primarily for the latter until their claims are paid. Each and every loanholder has a substantial equitable interest *137in each and every dollar of the fund and securities which represent it. The legal title to the fund, including the securities belonging thereto, is in said commissioners. Within the lines of their authority as trustees they have absolute control of it. The city has no more right to the custody and control of the securities than the loanliolders have, and not as much. The sinking fund is now represented by securities amounting in round numbers to $25,000,000, about $14,000,000 of which are in certificates of the city, six per cent loans, in which the commissioners are authorized to invest; but those city sixes are no more the property of the city than are the United States bonds or other securities in which the sinking fund is invested. In view of the authority of the commissioners to sell and reinvest, non constat that the same securities will represent the fund when the corresponding loan matures.
As we have seen, the funded debt of the city, including the securities held by the commissioners of the sinking fund, on all of which it is paying and must continue to pay interest until the corresponding loans respectively mature, is $52,578,845.22, nearly up to the seven per cent limit. If the proposed $6,000,000 loan is placed, the funded interest-bearing debt of the city will be $58,578,845.22, or about $5,000,000 in excess of the seven per cent limit. That excess will, of course, necessitate an additional requisition on the taxpayers of the city for an amount sufficient to pay the interest on said excess and provide for the payment of the principal at maturity. This would be a clear violation of the constitutional limitation, both in letter and in spirit. If it is not, there is no good reason why the excess may’’ not be increased to the extent of $25,000,000 — the amount of securities in the sinking fund. The only justification or excuse that is suggested for this manifest violation of one of the most valuable safeguards of the constitution is that the city, in ascertaining the amount of its debt, has a right to deduct from its funded debt, on which it is now paying and must continue to pay interest, the amount of the city sixes now owned and held by the commissioners of the sinking fund, thus reducing its so-called real debt to about $44,575,845.22. This proposition is as unsound as it is novel.
What are we to understand by the word “ debt ” as employed in the section above quoted ? As everybody would naturally *138understand it, the debt of a city is the aggregate amount of its outstanding obligations or promises to pay. A debt is defined to be “ that which is due from one person to another, whether money, goods or services, and whether payable at present or at a future time.” As defined by the Century Dictionary, indebtedness is (1) “ The state of being indebted without regard to the ability or inability to pay the debt.” (2) “ The amount owed — debts collectively; ¡is the indebtedness of an individual or a corporation.” Surely the word “debt ” ought to embrace and does embrace at least all obligations or promises to pay, upon which interest is payable and is actually paid at stated times. As employed by the framers of the constitution, and the people by whom it was adopted, the phrase “ debt of any city,” etc., was undoubtedly intended to mean at least all interest-bearing obligations or promises to pay.
As to the second ground: Conceding, to the fullest extent, the meritorious character of the purpose for which the proceeds of the $6,000,000 loan is to be used (the reconstruction by the city of part of the Philadelphia & Reading Railroad, in which that company is confessedly interested to the extent of at least $3,000,000, which it promises to pay or secure to the city), the undisputed facts sufficiently show that at least the sum last named is to be expended for the use and benefit of said company in such way as to be in truth and in fact neither more nor less than an appropriation of money for or a loan of the city’s credit to said railroad corporation, in violation of section 7, article 9, of the fundamental law.
Time will not permit the discussion of this point. For reasons above suggested, I would award the injunction.