Court Opinion

ID: 9300118
Source: CourtListenerOpinion
Date Created: 2022-12-02 17:06:36.600182+00
Date Added: 2024-06-11T17:13:38.980844
License: Public Domain

WOODS, Circuit Judge.
The act of the legislature of January 17, 1870, conferred ample authority upon the city of Mobile to issue the bonds from which the coupons of relators were detached, and even without express authority to that effect, implied an authority to levy a tax for their payment. Loan Ass’n v. Topeka, 20 Wall. [87 U. S.] 655; Gibbons v. Mobile & G. N. R. Co., 36 Ala. 439; Ex parte Selma & G. R. Co., 45 Ala. 696; Ohio v. Commissioners, etc., of Clinton Co., C Ohio St. 280; U. S. v. New Orleans [Case No. 15,871]. Besides the implied power there is an express agreement, on the part of the city, set out in the ordinance of June 25, 1869, and approved and ratified by the legislature, by the act of January 17, 1S70, by which the city bound itself to appropriate sufficient moneys from its treasury to pay the interest, and reserved to itself the right to raise the same by special tax, which reservation was also approved by the same act of the legislature. The city acted upon this authority, and, as its answer shows, for several years levied a special tax to pay the interest on the bonds issued to the Mobile & Alabama Grand Trunk Railway Company. The authority to levy the tax for the payment of the interest on these bonds carries with it the duty to make the levy. The power to levy the tax is in the nature of a trust for the benefit of the holder of the bonds. The rights of the creditor and the ends of justice demand that it should be exercised in favor of affirmative action, and the law requires it. City of Galena v. Amy, 5 Wall. [72 U. S.] 705; High, Extr. Rem. § 397; Supervisors v. U. S., 4 Wall. [71 U. S.] 435. When the bonds which relator holds were issued, the law authorized, and, in effect, required, the levy of a tax to pay the interest thereon as it accrued. This law formed a part of the contract as much as if it had been written on the face of the bonds. Gelpcke v. Dubuque, 1 Wall. [68 U. S.] 175; Von Hoffman v. Quincy, 4 Wall. [71 U. S.] 535; Gunn v. Barry, 15 Wall. [82 ü. S.] 610; Commissioners’ Court of Limestone Co. v. Rather, 48 Ala. 446; Milner v. Pensacola [Case No. 9,619]. The city of Mobile, by its ordinance, confirmed by act of the legislature, has agreed to pay the interest on those bonds semi-annually, either out of its general revenue or by special tax. This contract is, of course, subject to the constitutional limit upon the taxing powers of the city restricting it to a levy not to exceed two per cent per annum.
The question is, therefore, presented by the demurrer to the answer, whether it was competent for the legislature, by an act passed subsequent to the issue of these bonds, to exhaust all the taxing power of the city, and direct the application of the proceeds of such taxation to other subjects, to the exclusion of the issue of bonds of which the relator holds a part. After authorizing the city to issue these bonds, and after approving the contract of the city to pay the interest semiannually, either by a general or special tax, can the legislature authorize and direct that all the taxing power of the city shall be exercised for the benefit of the holders of other bonds who have no specific claim upon the funds raised by taxation, or any part thereof, to the exclusion of these? In my judgment, such an act would be a violation of the rights of the holders of the bonds thus excluded, and an impairment of their contract with the city of Mobile. These bondholders are entitled to have all the taxing power of the city within the constitutional limit exercised, if necessary, to secure the performance of the contract made by the city with them. When that power is exercised, the current expenses of the city must be paid out of the fund so raised, and, as to the residue, the relators are entitled to share pro rata with the other creditors of the city who have no specific lien or claim to any portion of the taxes; and neither the city nor the legislature has the power to appropriate the taxing power of the city for the exclusive benefit of a class having no superior rights, while these relators have a contract in effect declaring that a part of the taxing power of the city shall be exercised for their benefit.
It appears, from the answer of respondent, that certain sums are due the holders of bonds issued under the acts of 1843 and 1858, for unpaid interest, and the answer avers that if these sums are paid, and also the sum *60required by the act of 1875, the taxing power of the city for the current year will be exhausted. But there is no averment that it is the purpose of the city to levy any tax to pay the past due interest referred to; and, exeluding taxation for such purpose, it appears that the city will not exceed its power to tax, if it should levy a sufficient sum to satisfy the judgment of the relators. Moreover, the bonds issued by authority of the acts of 1813 and 1858, cannot be affected by the limit imposed on the taxing power of the city by a constitution adopted after the issue of the bonds. These relators are here pressing their right to be paid by taxation. The city cannot protect itself from its obligation founded on its own contract to levy the tax, by showing that it has failed in former years to do its duty by its creditors, and allowed interest to accumulate, while at the same time it expresses no purpose to levy a tax to pay such interest due and unpaid.
In my judgment, the facts set up in the answer of the city of Mobile constitute no reason why the writ of mandamus asked for by the relators should not issue. The demurrer to the answer is. therefore, sustained.