Court Opinion

ID: 7192545
Source: CourtListenerOpinion
Date Created: 2022-07-24 16:58:52.701261+00
Date Added: 2024-06-11T16:16:13.868034
License: Public Domain

Dissenting Opinion.'
¡. Bermudez, C. J.
The very serious matter submitted in this, case to. the consideration of the Court, is the effect produced on the taxing power of the City by the limitation of one and a half per cent, contained in the premium bond Act. As far as the five mills not necessary for the alimony are concerned, when creditors claiming under its provisions come in conflict with other creditors who are entitled to the exercise of the municipal power of taxation for the enforcement of their rights, growing out of anterior contracts, the obligations of which are shielded from impairment by the Federal Constitution, and when. the taxpayers from whom the tax is tobe exacted, resista levy, at a rate in excess of the limitation to satisfy both classes, and insist upon the observance of the limitation as a matter of contract in their favor, abso-. lutely binding on the creditors composing the first class.
, The litigants-are named parties to the contract: the plaintiffs, as taxpayers and residents and debtors; the City, as the mouthpiece of the creditors of both denominations. While the plaintiffs, for their own protection against excessive taxation, ¡necessarily champion the rights of the outstanding creditors representing the unfunded bonded City debt, the City specially advocates those of the holders of the bqnds issued in 1876, under the legislative authority of that year. As to these this Act cannot be said to be tainted with unconstitutionally, however much it may be and undoubtedly is such, as regards others, whose prior rights have been sought to be invaded and annihilated by ruthless ostracism and wanton spoliation.
The difficulty presented consists, in determining what was and is the Object of the Act which imposes the limitation invoked as an inhibition against all and any taxation in excess of the rate, stated; in other words, what is the meaning and purport of the limitation clause; or,, practically, whether antecedent creditors, whose claims are founded. o.u antecedent contracts, the obligations of which cannot be impaired, are entitled to exhaust, in their exclusive behalf, the exercise of the, taxable power of the City of New Orleans,, up to the limitation placed upon it by the premium bond Act ? ., ,
,.If those creditors are entitled to such preference,, then the whole of the five mill tax, when raised, will have to.be applied in deduction of, the 16| mills required to pay their judgments from the Federal Cour.t,. so that the aggregate, instead of-being 314 mills, would be 26f -mills *144only. In that case the holders of drawn premium bonds would have to wait until after the preferred ones shall have been fully paid what may be due them. It would not be until then that the five mills would be levied for their benefit.
If those same creditors are not entitled to .the preference, then the 16-3 mills and any subsequent other rate of taxation for a similar object shall' have'to be' raised, withoutany aid’from the fifteen mill tax, and the five mills, if not inore, over and above the amount required for municipal alimony, but-within the 15 mills, shall continue to be raised until the consummation of the scheme;
Into that matter shall it now be inquired.
In view of the most'distressing circumstances in which the City of New Orleans was at the Time' Involved, the municipal authorities assumed to veuiiire'iff the ‘adoption Of a certain plan, in order to force a composition with the creditors whose claims were represented by bonds. Apprehending grounded resistance, these authorities procured from the' General Assembly an ¿Vet ratifying their doings and expounding their scheme known as the premium bond Act. It bears No. 31 of the Acts of 1876.
The evident purpose of that “ remarkable legislation ” was to compel the bondholders, each and all, nolens nolens, to fund their bonds and to receive in exchange thereof other bonds, payable at unknown and fortuitous dates, and tó 'be known as the "premiums bonds of the City; These were to be of'thé denomination of twenty dollars, dated September 1st, 1875, and to bear five per cent, interest from July 15th of that year, the interest and principal’ and á premium to be paid at the same time and not separately. That titne'was to be determined by hazard in a lottery, upon the turn of a wheel, in January, April, July and October of each year, or such other dates as the Council may prescribe and pursuant to a certain schedule. ''
All the unfunded, outstanding or “ old ” bonds were to be deemed as funded for the purposes of the Act, and the: City was to hold the premium bonds representing the unfunded bonds, for which provision was to be made out of drawn bonds they held or remaining in the possession of the City; the provision being the application of such drawn bonds in kind or cash to the retirement of such unfunded, outstanding or “ old’” bonds.
At the end of fifty years the City was to be liberated from all bonded' indebtedness.
For the purpose of providing for the payment of the drawn bonds, in principal, interest and premium, it was prescribed that a budget would be prepared and adopted, and that a tax of five mills only should be levied, up to' the year 1881, and of at least five mills after that year, *145provided the rate of taxation for 11 every purpose of government,'1'1 including said five mills, should never exceed one and a half per cent, or fifteen mills on the dollar, until the full and complete payment of said premium bonds.
Section II, (which is to the effect that should the one-lialf of one per cent, tax be more than adequate to pay the. drawn premium bonds, the surplus shall be used in retiring the outstanding bonds, and which declares that said one-half of one per cent, shall be considered as part of the one and a half per cent, taxation to which the taxing power of the City is limited) expressly declares that “ the intention of this Section is to limit the City taxation to one and a half per cent, annually, until the entire extinction of the bonded debt.” It does notsay funded, but bonded.
To coerce submission to its terms and provisions, it was provided by Section 7 that no tax for the payment of principal or interest of other than premium bonds would thereafter be levied, and that all laws authorizing or requiring the City to pay such tax were repealed. The Section went so far as to declare that it would be incompetent for any court to issue a mandamus to the officers of the City to levy and collect any interest tax other than that for the premium bonds.
The 11th Section provides that the surplus, if any, realized by the annual levy of the tax to be raised in the execution of the plan, shall be distributed in retiring the outstanding bonded debt.
In the first paragraph of the preamble of the Act, the total of the City debt is stated to exceed twenty-three millions of dollars.
The Constitution, in force at the time of the passage of the Act, required the object or objects of all acts to be expressed in the title.
In the present case the title of the Act begins with the words: “ An Act. to adjust, regulate and provide for the bonded debt of the City of New Orleans,” etc.
As appears from the pamphlet in evidence in the case, the premium bond plan contemplated the funding of the entire debt of the City.
It is, therefore, manifest that the premium bond Act was designed to embrace the entire debt of the City, and that all means were resorted to in order to induce and compel the creditors of the City to accept its terms. It is also manifest that for “ every purpose of government” it was agreed by a formal contract that the taxing power of the City was limited to fifteen mills, including the five mills intended for the execution of the plan, and that under no contingency would that power ever be exercised beyond that limit, until the entire extinction of the bonded debt of the City.
That contract must be read by the light of the Constitution of the *146United States, which protects debts resulting from antecedent contracts against all impairment of the obligations of the same. Hence, it is, that the obnoxious 7th Section, which was levelled against all outstanding unfunded bonds owned by recalcitrant holders, has been loudly denounced by every court under whose attention it has come, and read out of the Act, as containing provisions impairing the obligations of contracts and so absolutely repugnant to the Federal Constitution.
"When relieved of that offensive feature, the provisions of the Act have the complexion - of a special legislation, designed to carry out the object expressed in its title, which was to adjust, regulate and provide for the entire bonded debt of the City of New Orleans, whether funded or not.
If such be, and indeed it is .the case, then the five mills tax was intended for the benefit of all the bondholders of the City, whether their bonds were funded or unfunded, and was to accrue or be distributed in due proportion among the holders of both classes of municipal •obligations.
■ The evidence in the case shows that all the outstanding or “ old ” bonds of the City were not funded, that of those $13,235,540 only were funded j that the five mills tax has been regularly levied and collected; ■that the proceeds realized have been applied to the payment of drawn premium bonds, whether owned by creditors or held by the City, representing its unfunded bonded debt; that the sums drawn by the bonds ■thus remaining in the possession of the City, were not at all applied to the redemption of any of the unfunded obligations, but were exclusively used for the purchase of premium bonds, so that the- original amount of such bonds which had actually issued to creditors (viz: $13,235,540) was reduced to $8,599,020. By this mode obligations ■were taken up in five years which it would have required twenty years to retire under the mechanism of the Act. Such an operation was never contemplated. It was a flagrant injustice by which the premium bondholders cannot be permitted to be benefitted. The evil or wrong •done must be repaired by all the means which the long arms of equity can successfully reach and employ.
It therefore follows that, as the five mills were to be raised for the benefit of the bonded debt of the City, however represented, and were •to be apportioned accordingly, and as they were not so applied from •the beginning, the holders of bonds susceptible of being drawn, under ■the Act, must be deprived of all participation until the proper balance 'or equilibrium has been restored.
No doubt, those creditors who accepted the terms and conditiqns of -the Act did so, deeming they would . thereby improve or better their *147condition. Whether they have accomplished that result or not is a question with which this Court has no concern Avhatsoever.
The only question before it is, whether the plaintiffs shall pay the fhre mills, and whether, when paid, those five mills shall be applied to the payment of drawn premium bonds, or to the satisfaction in part of the l6f mills tax raised to meet the judgment creditors recognized by the U. S. Circuit Court. '
The fact is glaring that there is outstanding a bonded unfunded City debt of $6,251,553, the interest on Avliich has not been extinguished by a farthing for the last six years.
The taxpayers, plaintiffs in this case, contend, in the terms of the Act under which the premium bonds were issued, and A^liich is a coutract between them and the holders of such bonds and the City, that the intention was to limit the City taxation for “ every purpose of government” to one and a half per cent, annually, until the extinction of the bonded debt of the City; and that as part of that debt is unfunded and remains still due, they cannot be required now to pay more than fifteen mills.
That position seems unanswerable by the premium bondholders, although it be no impregnable bulwark against the holders of unfunded bonds, whose rights as'creditors, antecedent to the Act of 1876, are beyond the reach of that or of any subsequent legislation.
It is, therefore, considered that, while the judgment creditors are entitled to a special tax of 16£ mills for the satisfaction of their judicially liquidated demands, based on valid anterior contracts, and while the taxing power of the City of New Orleans, under the law which confers, but restricts it, can be and must be exercised owing to existing imperious necessities, the plaintiffs should not be made to pay the 31 £ mills claimed for 1882, but only 26| mills altogether, out of Avhich ten mills only are to be applied for municipal alimony and the remaining 16£ mills to be distributed exclusively among the judgment creditors!
The Ordinances attacked impair the contract insisted upon by the plaintiffs.
The taxpayers, plaintiffs in this case, have made a last effort to resist the illegal collection from them of the entire five mills.
It is proved that the amount of premium bonds issued and held by creditors of the City is only $8,599,020; that the difference between that sum and the amount originally uttered, as well to creditors, or retained by the City, and representing the unfunded bonded debt, is considered as outstanding and that the five mills tax will continue to be levied just as though the entire unfunded bonded debt was funded and Avas represented by creditors holding premium bonds.
The thought is appalling that this tax will be raised annually during *148thirty odd years to come for the nominal benefit of unfunded outstanding bonds, really for the advantage of funded bonds actually issued to creditors, the aggregate capital of which will however decrease annually. The use made in the past of the premium bonds drawn by the City is far from being an assurance that in the future holders of unfunded outstanding antecedent bonds will obtain any relief therefrom. The past has been and the future promises to be nothing short of a bare delusion and a crying injustice.
It is illegitimate for courts of justice, in the solemn discharge of their Racred duties, to allow themselves to be influenced in the least by the consequences which may attend their judgments. If it were legitimate to do so, a graphic, desolating picture could be drawn of the lamentable conditioi? in which the tax-ridden community of the City of New Orleans is now' to be reduced.
With the prospect of an annual tax of $050,000 for the Consolidated Bonds of 1882 and for such judgments as may have to be paid by the levy of special taxes, the quantum of taxation may probably exceed 40 mills on the dollar of taxable property in the City, a rate surely not in contemplation when the Act of 1876 was adopted.
A different construction writes out the contract from the premium bond Act and leaves the plaintiffs in a worse predicament than that in which they would find themselves had not the sanctified law of relief been passed, a law stigmatized by the United States Supreme Court as “ tainted with the leprosy of repudiation.”
I, therefore, dissent from the opinion and decree.