City of Baltimore v. Gill

• Decision Date: 26 November 1869
• Citation: 31 Md. 375
• Parties: THE MAYOR AND CITY COUNCIL OF BALTIMORE v. GEORGE M. GILL and Others.
• Court: Maryland Court of Appeals

31 Md. 375

THE MAYOR AND CITY COUNCIL OF BALTIMORE v. GEORGE M. GILL and Others.

Court of Appeals of Maryland

November 26, 1869

Appeal from the Circuit Court of Baltimore City.

The bill of complaint in this case was filed on the 30th of June 1869, by George M. Gill and others, in behalf of themselves and of all others similarly interested, who might desire to make themselves parties to the proceeding, and represented that they were all citizens of the State of Maryland, and taxpayers on real and personal property situated in the City of Baltimore, and all citizens and residents of the City of Baltimore, except one, who was a citizen of Baltimore County. It stated that on the 30th of March, 1869, the Mayor of the City addressed a communication to the City Council thereof in which he set forth the financial condition of the Western Maryland Railroad Company, and the amount of money needed to complete and equip their road to Williamsport, and earnestly recommended that the required relief should be granted; that this communication was referred to the joint standing committee of the City Council on Ways and Means, which, on the 14th of May, 1869, reported in favor of granting the relief required by the said company, and submitted an ordinance for the purpose, which, after some amendments, was passed by both branches of the City Council, and approved by the Mayor.

The bill then charged that the large debt which, from time to time, had been created by the City of Baltimore, for different purposes, and especially for the benefit of works of internal improvement, and the heavy liabilities which the city had incurred, with the object of aiding such works, were felt by the citizens thereof to be a great grievance, and that, consequently, in the Constitution of 1867, the 7th section, Art. 11 was inserted, which restrains the city by provisions of a strict character from giving thereafter aid to such works; but, notwithstanding this, the proceedings above referred to clearly showed that the whole object of the Mayor and City Council in passing said Ordinance, was to grant the aid of the city in the construction of the Western Maryland Railroad; and that although this object was not avowed in said Ordinance, but on the contrary, was attempted to be concealed by the manner in which it was drawn, yet that it plainly appeared from the face of the Ordinance itself and that the various provisions thereof were in direct violation of both the spirit and language of said section of the Constitution.

The complainants then showed (as grounds of the repugnancy of the Ordinance to the provisions of the Constitution) that the Ordinance, by its title, professed to provide for raising the sum of one million of dollars by the Mayor and City Council of Baltimore--being the amount which, in the judgment of the committee, as declared in their report, was sufficient for the completion and equipment of said railroad--by the hypothecation of such number of the shares of the stock of the Baltimore and Ohio Rail Road Company, owned by the city as might be necessary for the purpose, to be invested in the bonds of the Western Maryland Rail Road Company; that said purpose, as declared in the title to the Ordinance, was unconstitutional, because to raise money by the hypothecation of stock was, in fact and in law, to borrow it, and therefore, created a debt, and by said section of the Constitution, the Mayor and City Council of Baltimore were prohibited from creating any debt whatever, except in the following cases: First, when such debt was for the benefit of works of internal improvement, and then it must be authorized by an Act of the General Assembly, and by an Ordinance of the Mayor and City Council, and approved by a majority of the legal voters of the City of Baltimore; and second, when the debt was for money temporarily borrowed to meet any deficiency in the City Treasury, or to provide for any emergency arising from the necessity of maintaining the police, or preserving the safety and sanitary condition of the city; that these were the only purposes for which the city could borrow money, and, therefore, to borrow money for the purpose of making an investment, if that were the true intent and meaning of the Ordinance, would be clearly in violation of the express letter of the Constitution, as well as of its spirit and meaning.

The bill then charged that the real object of the Ordinance was not in good faith to borrow money for the purpose of investment, but was to borrow money to be expended in the construction and equipment of the Western Maryland Rail Road, and that this object which was in direct violation of said section of the Constitution was plainly shown on the face of the different sections of the Ordinance; that the first section provided for the raising by the Mayor and City Council of Baltimore of $1,000,000 on the best terms possible, by the hpothecation of such number of the shares of the stock of the Baltimore and Ohio Rail Road Company owned by the city, as should be requisite for the purpose, to be returned on or after the 1st of May, 1870, but those advancing the money were to look only to the stock pledged for the return of said advances, with interest thereon; that this section provided for the creation of a debt by the city of $1,000,000, payable on or after May 1st, 1870, at an undefined rate of interest, and to be secured by the hypothecation of an undefined amount of stock, and that the provision that those who advanced the money were to look only to the stock pledged for its return, in no degree prevented the transaction from creating a debt, because a debt existed whereon money was due, and every contract whereby a determinate sum of money became due, created a debt, and whether the debt be secured by a pledge of much or little property, or by a personal liability, or in any other manner, or whether it be not secured at all, was a matter which affected the remedy only, and not the debt itself; that the second section directed the money so raised, to be invested in the bonds of the Western Maryland Rail Road Company, to be secured by a mortgage to be executed by said company, to be next in priority after existing mortgages, said mortgage to contain covenants that the proceeds of said bonds were to be applied only to the construction and equipment of said rail road to Williamsport, that said company should be the sole owner of the continuous line between Baltimore and Williamsport, that the main works and depot of the company were to be in the City of Baltimore, and that the sum, so to be invested in bonds was not to be demanded, except as it might be required to complete said road from its present terminus to Williamsport; and the bill then charged that this second section of the Ordinance was in violation of all the restrictions contained in the Constitution, Art. 11, sec. 7, in that it gave or lent the credit of the city in aid of a corporation, to wit: the Western Maryland Rail Road Company; it involved the city in a work of internal improvement, and it granted aid to the Western Maryland Rail Road, which involved the faith and credit of the City of Baltimore, and made an appropriation therefor.

The bill then stated the provisions of the third section of the Ordinance, and charged that if any doubt could possibly exist, that the real object of the Ordinance was not to make an investment of the money, but to create a debt of the city on the pledge of its rail road stock, with the purpose of appropriating the amount so raised for the benefit of the Western Maryland Rail Road Company, and to lend the credit of the city in the construction of said rail road, and to involve the city in such construction, it was entirely removed by these sections, because they provided that said pretended investment was to last until said debt, with interest, could be paid by the sale of a sufficient number of bonds of said company, endorsed by the city to make such payment, provided the General Assembly, at its next session, and a majority of the voters of the city should sanction such an arrangement, but if, as provided by the fourth section, such sanction could not be obtained, then the said debt was to be paid by a sale of the stock of the Baltimore and Ohio Rail Road Company, hypothecated by the city, but, in either case, the $1,000,000 borrowed by the city, would, in the meantime, have been wholly expended in the construction and equipment of said rail road, and the debt of the city would be only repaid by a sale of bonds for which it made itself responsible, or by a sale of such portion of its Baltimore and Ohio Rail Road stock as might be necessary for the purpose. That the stock of the Baltimore and Ohio Rail Road Company owned by the city, constituted an investment long since lawfully made under a special authority from the General Assembly of Maryland, and was of so safe and productive a character that the stock of that company was then selling in the market at about twenty per cent. above its par value, and yielding regular dividends of not less than eight per cent. on its par value, and if this stock of the city should be sold on the happening of the contingency provided for, the city would have parted with its most valuable property, and instead thereof, would be left the owner of bonds of the Western Maryland Rail Road Company, having no market value, and depending for any value thereafter on the very doubtful result of the completion of said road, and its successful and profitable working thereafter.

The bill further charged, that independently of said provision of the Constitution, there was no power nor authority in the defendant to pass said Ordinance, either by virtue of the charter of the City of Baltimore or the laws of the...