Bryson City Bank v. Town of Bryson City

• Decision Date: 02 March 1938
• Docket Number: 21.
• Citation: Bryson City Bank v. Town of Bryson City, 213 N.C. 165, 195 S.E. 398 (N.C. 1938)
• Parties: BRYSON CITY BANK v. TOWN OF BRYSON CITY et al.
• Court: North Carolina Supreme Court

195 S.E. 398

213 N.C. 165

BRYSON CITY BANK v. TOWN OF BRYSON CITY et al.

No. 21.

Supreme Court of North Carolina

March 2, 1938

Appeal from Superior Court, Swain County; H. Hoyle Sink, Judge.

Action by the Bryson City Bank against the Town of Bryson City and others to restrain issuance and delivery of refunding bonds pursuant to ordinance of defendant city. From an adverse judgment, the plaintiff appeals.

Judgment affirmed.

Laws in force at time and place of making of contracts enter into and become integral parts of contracts as much as if expressly incorporated in contracts.

Civil action to restrain issuance and delivery of refunding bonds pursuant to ordinance of defendant city.

The pertinent facts, duly found and set out in the judgment follow:

(1) The Town of Bryson City has outstanding bonded indebtedness in the principal sum of $365,000.00 represented by bonds issued and held by purchasers prior to July 1, 1933, the accrued interest thereon and a portion of the principal now being in default.

(2) The town proposes to refinance its existing bonded indebtedness by issuing refunding bonds "in lieu of and to be exchanged for a like amount of its said outstanding bonds," which said refunding bonds are "to be delivered to the present holders of the original bonds in lieu of and in exchange for said original bonds and the defaulted interest now due and unpaid thereon."

By ordinance duly adopted October 8, 1937, pursuant to the Local Government Act, chapter 60, Public Laws 1931, as amended by chapter 258, Public Laws 1933, and chapter 356, Public Laws 1935, it is provided, among other things, "that in each year while any of said refunding bonds shall be outstanding there shall be levied upon all the property within the corporate limits of the Town of Bryson City, except only such property as would be exempt from taxation under the laws in force at the time of the creation of the indebtedness refunded, a tax sufficient to pay the principal and interest of said refunding bonds as the same shall become due and payable * * * and that the holder, or holders, of said refunding bonds shall be subrogated to all the rights and powers of the holders of such indebtedness so refunded."

(3) At the time of the creation of this original indebtedness and the bonds representing same were sold and delivered, there was no limitation, other than that contained in the Constitution and general laws, upon the total tax that the town might levy for the payment of said bonds and accrued interest.

(4) Under the provisions of chapter 81, Public-Local Laws 1935, as amended by chapter 338 Public-Local Laws 1937, the Town of Bryson City is prohibited from levying any annual taxes in excess of $1.60 on the $100 valuation on the taxable property situate within the corporate limits of said town for all purposes for the years 1935-1939, and perhaps for succeeding years.

(5) A levy of $1.60 on the $100 valuation of taxable property within the corporate limits of Bryson City has not produced sufficient revenue to pay the principal and interest on the outstanding bonded indebtedness of said city, and will not produce sufficient revenue to pay the principal and interest on the proposed refunding bonds as they become due and payable.

(6) It is to the best interest of all concerned that the present bonded indebtedness be refunded and that the proposed refunding bonds be exchanged for the original bonds.

Upon the foregoing findings, his honor concluded that said refunding bonds would not be subject to the tax limitation prescribed by chapter 81, Public-Local Laws 1935, as amended by chapter 338, Public-Local Laws 1937, and entered judgment accordingly.

Plaintiff appeals, assigning errors.

S. W. Black, of Bryson City, for appellant.

McKinley Edwards, of Bryson City, for appellees.

STACY Chief Justice.

The power of municipal taxation, within constitutional bounds, may be expanded or contracted according to the legislative will, provided that in limiting or reducing the power previously granted the obligation of existing contracts is not thereby impaired. Smith-Courtney Co. v. Com'rs, 182 N.C. 149, 108 S.E. 443; Green v. Asheville, 199 N.C. 516, 154 S.E. 852; 6 R.C.L. 327. Here, it is admitted, or found as a fact, that the prohibition contained in chapter 81, Public-Local Laws 1935, as amended by chapter 338, Public-Local Laws 1937, against levying any annual taxes in excess of $1.60 on the $100 valuation of property within the corporate limits of Bryson City, if permitted to stand, will impair the obligation of the city's outstanding bonds. As to these engagements, therefore, the limitation contained in said act must be held to be inoperative. Spitzer & Co. v. Com'rs, 188 N.C. 30, 123 S.E. 636.

Generally speaking, it may be said that the obligation of a contract is coeval with the undertaking to perform, and includes all the means which the law afforded for its enforcement at the time of the making of the contract. Green v. Asheville, supra. In other words, the obligation of a contract within the meaning of the constitutional prohibition against impairment includes all the means and assurances available for its enforcement at the time of its execution. Bateman v. Sterrett, 201 N.C. 59, 159 S.E. 14; Barnes v. Barnes, 53 N.C. 366; Jones v. Crittenden, 4 N.C. 55, 6 Am. Dec. 531; 6 R.C.L. 324 et seq.

"The obligation of a contract includes every thing within its obligatory scope. Among these elements nothing is more important than the means of enforcement. This is the breath of its vital existence. Without it, the contract, as such, in the view of the law, ceases to be, and falls into the class of those 'imperfect obligations,' as they are termed, which depend for their fulfilment upon the will and conscience of those upon whom they rest. The ideas of right and remedy are inseparable. 'Want of right and want of remedy are the same thing."' Mr. Justice Swayne in Edwards v. Kearzey, 96 U.S. 595, 600, 24 L.Ed. 793; also reported in Id., 79 N.C. 664.

As pertinent and illustrative of the principle may be instanced Clark v. Reyburn, 8 Wall. 318, 322, 19 L.Ed. 354, where it was said that the remedy provided by statute for the foreclosure of a mortgage, in existence at the time of its execution, enters into and becomes a part of the contract of the parties, and any change by legislative action, which substantially and materially affects this remedy to the injury of the mortgagee, is a law "impairing the obligation of the contract," within the meaning of the constitutional provision on the subject; and Brine v. Ins. Co., 96 U.S. 627, 24 L.Ed. 858, where it was held that a statutory right of redemption, existent at the time of the making of a mortgage, enters into and becomes a part of its terms. See 6 R.C.L. 365, and cases there cited.

Speaking to a question parallel to the one here presented, in State of Louisiana ex rel. Hubert v. New Orleans, 215 U.S. 170, 30 S.Ct. 40, 43, 54 L.Ed. 144, Mr. Justice Day, delivering the opinion of the court, said: "The power of taxation conferred by law entered into the obligation of the contracts, and any subsequent legislation withdrawing or lessening such power, leaving the creditors without adequate means of satisfaction, impaired the obligation of their contracts, within the meaning of the Constitution."

And in support of the position, the following was quoted from the opinion of Mr. Justice Field in Louisiana ex rel. Ranger v. New Orleans, 102 U.S. 203, 206, 26 L.Ed. 132: "The obligation of a contract, in the constitutional sense, is the means provided by law by which it can be enforced,-by which the parties can be obliged to perform it. Whatever legislation lessens the efficacy of these means impairs the obligation. If it tend to postpone or retard the enforcement of the contract, the obligation of the latter is to that extent weakened. The Latin proverb, Qui cito dat bis dat,-he who gives quickly gives twice,-has its counterpart in a maxim equally sound,-Qui serius solvit, minus solvit,-he who pays too late, pays less. Any authorization of the postponement of payment, or of means by which such postponement may be effected, is in conflict with the constitutional inhibition."

Again, in Port of Mobile v. Watson, 116 U.S. 289, 6 S.Ct. 398, 405, 29 L.Ed. 620, it was said: "Therefore the remedies for the enforcement of such obligations assumed by a municipal corporation, which existed when the contract was made, must be left unimpaired by the legislature, or, if they are changed, a substantial equivalent must be provided. Where the resource for the payment of the bonds of a municipal corporation is the power of taxation existing when the bonds were issued, any law which withdraws or limits the taxing power and leaves no adequate means for the payment of the bonds, is forbidden by the constitution of the United States, and is null and void."

It is likewise well established that the laws in force at the time and place of the making of contracts enter into and become integral parts thereof as much so as if they had been expressly incorporated therein. Eckard v. Ins. Co., 210 N.C. 130, 185 S.E. 671; Headen v. Ins. Co., 206 N.C. 270, 173 S.E. 349; Bateman v. Sterrett, 201 N.C. 59, 159 S.E. 14; Wachovia Bank & Trust Co. v. Hudson, 200 N.C. 688, 158 S.E. 244; House v. Parker, 181 N.C. 40, 106 S.E. 137; Guilford Lumber Mfg. Co. v. Holladay, 178 N.C. 417, 100 S.E. 597; Hill v. Kessler, 63 N.C. 437.

The law on the subject is very clearly stated by Mr. Justice Swayne in the leading case of Von Hoffman v. City of Quincy, 4 Wall. 535, 550, 18 L.Ed. 403: "It is also settled that the laws which subsist at the time and place of the making of a contract, and where it is to be performed, enter into and form a part...