Court Opinion

ID: 3484144
Source: CourtListenerOpinion
Date Created: 2016-07-05 21:09:01.425664+00
Date Added: 2024-06-11T13:50:34.712125
License: Public Domain

The General Assembly of Maryland, by chapter 560 of the Acts of 1920, authorized the Mayor and City Council of Baltimore "to issue its stock to an amount not exceeding fifty million ($50,000,000) dollars, said stock to be issued from time to time and payable at such times and bearing such rate of interest as the said Mayor and City Council of Baltimore shall by ordinance prescribe. The proceeds of the sale of said stock shall be used for the purposes of this act in such *Page 275 
manner as may be provided by ordinance of the Mayor and City Council of Baltimore. The certificates of stock shall not be issued unless or until the ordinance which the Mayor and City Council of Baltimore is hereby authorized to pass for the purpose aforesaid, shall be approved by a majority of the votes of the legal voters of the City of Baltimore cast at the time and place named in said ordinance."
The Mayor and City Council of Baltimore, by Ordinance No. 380, known as "The Port Development Loan Ordinance," adopted in pursuance of that act, provided for an issue of serial stock bearing interest at five per cent., and payable in fixed annual instalments over a period of forty years, which ordinance contained these provisions:
    "That the said stock shall bear interest at the rate of five per centum (5%) per annum during the respective periods that the series in which it is issued may run and that the said interest shall be paid semi-annually on the first day of May, and the first day of November, in each year. * * *
    "And be it further ordained, that a sum sufficient to meet the interest on any outstanding stock, as well as the principal of the current maturing series of said stock shall be annually collected by taxation, and that a rate sufficient to produce said sum shall be levied in each year upon every one hundred dollars' worth of assessable property in the City of Baltimore, and in the proper proportion for any greater or less amount."
That ordinance was submitted to and approved by the legal voters of the City of Baltimore at an election held on November 2d 1920.
Chapter 155 of the Acts of 1927 attempted to authorize the Mayor and City Council of Baltimore "to provide by ordinance or ordinances, whenever it may appear practicable and advisable to do so, for negotiating its loans, evidenced by bonds, stocks or certificates of indebtedness, or any part thereof heretofore or hereafter authorized by the General Assembly of Maryland and approved by the voters pursuant to ordinance, but not yet actually issued, at a rate of interest per *Page 276 
annum less than that which may have been provided for in any ordinance or ordinances submitting such loans to the voters for their approval."
By Ordinance No. 104, adopted September 20th, 1927, the Mayor and City Council of Baltimore ordained "that the Commissioners of Finance in the issuance of ten million dollars ($10,000,000) of the fifty million dollars ($50,000,000) Port Development Loan, authorized by chapter 560 of the Acts of 1920 (which ten million dollars ($10,000,000) was submitted to and approved by the voters pursuant to Ordinance No. 380, approved July 6, 1920), shall issue the same at the rate of four per centum (4%) per annum during the respective periods for which the series of the said ten million dollars ($10,000,000) may run instead of at five per centum (5%) per annum as provided in section 2 of Ordinance No. 380, approved July 6, 1920, and said interest at four per centum (4%) per annum shall be payable semi-annually on the first day of May and the first day of November in each year" and "that so much of section 2 of Ordinance No. 380, approved July 6, 1920, which provides that the series of said ten million dollar loan shall bear interest at five per centum per annum during the respective periods of said series be and the same is hereby repealed."
Subsequently the Commissioners of Finance of the City of Baltimore invited bids for the purchase of $2,000,000 of the $10,000,000 issue referred to in Ordinance No. 380, maturing serially and bearing interest at four per cent., and the Mercantile Trust  Deposit Company and others bid $100.913 for each $100 par value of "all or none" of the proposed issue. Thereupon the appellant in this case filed, in the Circuit Court of Baltimore City, a bill of complaint, in which he prayed the court to restrain the proposed sale on the ground that the appellee had no authority to issue or sell the stock in the form proposed, because such issue or sale in that form had not been submitted to or approved by the legal voters of Baltimore City as required by article 11, section 7, of the Constitution of Maryland. The matter was heard and submitted on a case stated, and the trial court ruled that *Page 277 
the proposed issue of stock was valid, and refused the injunction. This appeal is from that decree.
The sole question presented by the appeal is whether the Mayor and City Council of Baltimore, acting under a power granted by the Legislature of Maryland, can validly change the rate of interest specified in an ordinance submitting to the legal voters of Baltimore City for their approval or rejection a proposed issue of bonds, stocks, securities, or other obligations of the City of Baltimore.
The answer to that question depends upon the meaning to be given the word "debt," as used in section 7, article 11, of the Constitution of Maryland, which in part provides that "no debt (except as hereinafter excepted) shall be created by the Mayor and City Council of Baltimore; nor shall the credit of the Mayor and City Council of Baltimore be given or loaned to, or in aid of any individual, association or corporation; nor shall the Mayor and City Council of Baltimore have the power to involve the City of Baltimore in the construction of works of internal improvement, nor in granting any aid thereto, which shall involve the faith and credit of the City, nor make any appropriation therefor, unless such debt or credit be authorized by an Act of the General Assembly of Maryland, and, by an ordinance of the Mayor and City Council of Baltimore, submitted to the legal voters of the City of Baltimore, at such time and place as may be fixed by said ordinance, and approved by a majority of the votes cast at such time and place."
In construing that provision it should be so interpreted as to allow the municipal authorities the widest measure of freedom necessary to the efficient discharge of their duties, but which is nevertheless consistent with its mandate, but the courts are not at liberty to go beyond that, and to give to it a meaning inconsistent with its language, to gratify some demand of expediency or convenience. It may well be inferred that it is reasonable and necessary that the municipality should have some freedom of choice and change in fixing the interest rates which it will pay for money, and such a privilege may indeed be essential in marketing its *Page 278 
securities to the best advantage, but if that freedom is abridged by constitutional prohibitions the remedy is to amend and not to overrule the Constitution. This precise question does not appear to have arisen in this form in this court prior to this case, although the principles upon which it depends were considered in the case of Stanley v. Baltimore, 146 Md. 277. In that case it appeared that the Legislature, by chapter 373 of the Acts of 1920, "authorized the Mayor and City Council of Baltimore to issue its stock to an amount not exceeding twenty-six million dollars for various municipal activities, the submission of an ordinance for that purpose to the legal voters of Baltimore City, and the enactment of an ordinance for the expenditure of the proceeds of the sale of stock by a special commission." Pursuant to the authority contained in that act, an ordinance was prepared submitting to the legal voters the question of approving or rejecting the loan, and which specified the rate of interest at five per cent., and that ordinance was passed and approved by a majority of the voters. Subsequently the Mayor and City Council by another ordinance changed the interest rate to four and one-half per cent., and the question was whether the municipality had the power to make that change, and it was held that it had not. While the decision turned immediately upon the question of whether the Legislature had granted to the municipality the right to make the change after the ratification of the ordinance, it ultimately rested upon the constitutional provision to which we have referred, because the statute declared that the submission of the question as provided by it was required by the constitutional provision referred to.
Chapter 373 of the Acts of 1920 provided for the issue of certain stock "to be issued for such amounts and to be payable at such times and to bear such rate of interest as the Mayor and City Council of Baltimore shall by ordinance provide; but no stock shall be issued in whole or in part unless the ordinance of the Mayor and City Council of Baltimore providing for the issuance thereof shall be submitted to the legal voters of Baltimore City at such time *Page 279 
and place as may be fixed by said ordinance and be approved by a majority of the votes cast at such time and place as required by section 7 of article 11 of the Constitution of Maryland."
A comparision of the two acts will show them to be substantially identical in their relation to the question in issue in this case, and in that case it was held that, since the ratifying ordinance specified the rate of interest on the whole loan, that it had exhausted the entire power granted to the municipality by the enabling act, and that it could not thereafter change the rate of interest specified in the ordinance. With respect to that the court, in Stanley v.Baltimore, supra, said: "The court is, therefore, of the opinion that chapter 373 of the Acts of 1920 did require the city to determine the amount of the issue of stock, the rate of interest it should bear, and the times when it should become payable, by an ordinance which was to be submitted to the voters. In this view of the act, Ordinance No. 379 must comply with these exactions. * * * Ordinance No. 379 became a law, and, with respect to those matters covered by the ordinance, the city's power of legislation under chapter 373 was at an end, having been exhausted in its exercise."
If it was necessary in that case to state in the ordinance in either general or specific terms the rate of interest, then it was necessary to state it in the ordinance involved in this case, for in that respect chapter 373 cannot be distinguished from chapter 560 of the Acts of 1920.
But the contention of the appellee is that, whether that is so or not, nevertheless the Legislature had the power to change the interest rate specified in Ordinance No. 380, or in any other ordinance, on unissued stock, or to delegate to the municipality the power to make such change. But whether it had any such power must depend upon the meaning to be given the word "debt" as used in the constitutional provision quoted above. For if the interest on the issue of stock authorized by Ordinance No. 380 is a part of the debt to be incurred under the authority of that ordinance, manifestly the Legislature had no power mediately or immediately to change *Page 280 
the rate specified in it, for that would be to authorize a debt different in amount from that approved by the voters. Const., art. 11, sec. 7. And in respect to that question it was said inStanley v. Baltimore, supra: "The city assumed to pay the interest, and the faith and credit of the city were pledged not only for the security of the principal but also of the interest, which was an integral part of the debt." Certainly if, as stated in that case, the interest is an "integral part of the debt," it is difficult to see how, in the face of the constitutional guaranty, the Legislature can itself or by a delegate change the rate of interest specified in the ratifying ordinance without changing the amount of the debt, or without authorizing a different debt from that approved by the voters, and, unless we are to overrule that case, we must hold Ordinance No. 104 invalid. Whether interest is or is not a part of the principal debt seems to have depended to some extent upon the nature of the case in which the question has arisen, and it has been decided both ways. In Epping v. City of Columbus, 117 Ga. 263, the question involved was the validity of an issue of school bonds, and it turned on the meaning of the word "debt" as used in a provision of the state constitution limiting the debt which a municipality might incur. In that case, following what is undoubtedly the weight of authority in such cases, the court held that interest was no part of the principal debt. But in CentralBank  Trust Company, 139 Ga. 54, in construing a statute under which the state claimed certain interest, it was held that the term debt as used in the statute embraced interest as well as principal, and to the same effect is a statement in note 1, page 1372, 17 C.J. In the case last cited it is not clear whether the court referred to earned interest, which is usually held to be a part of the debt, or to unearned interest, which is generally held not to be a part of the debt. But in State etc. v. Lister,91 Wash. 9, in construing the word "debt" in a constitutional limitation upon the power of the state to borrow money, the court held that it included unearned interest, although that case may be distinguished on the ground that principal and interest were payable out of different *Page 281 
funds. But aside from these authorities, if any force is to be given the rule of stare decisis, we are constrained to regard the question as settled by Stanley v. Baltimore, supra, which held that the word "debt", as used in section 7, article 11, Const. of Md., does include interest, where by the express terms of the ratifying ordinance the rate is specified, the periods at which it is payable named, and provision made for levying taxes for its payment.
From what has been said it follows that in our opinion the injunction prayed by the appellant should have issued, and the decree denying it was erroneous and must be reversed.
Decree reversed, and cause remanded for further proceedings inaccordance with the views expressed in this opinion.