Ex parte Folsom

• Decision Date: 28 July 1904
• Citation: 131 F. 496
• Parties: EX parte FOLSOM et al. v. NINETY-SIX TP. et al. FOLSOM
• Court: U.S. Court of Appeals — Fourth Circuit

131 F. 496

EX parte FOLSOM et al.

FOLSOM v. NINETY-SIX TP. et al.

United States Circuit Court, D. South Carolina.

July 28, 1904

Shields Cates & Montcastle and H. J. Haynsworth, for petitioners.

J. B Pork and F. B. Grier, for respondents.

PRITCHARD Circuit Judge.

This is an application for a writ of mandamus to compel the auditor and treasurer of the county of Greenwood to assess and collect a judgment recovered against the township of Ninety-Six for certain bonds issued by it in aid of a railroad company. By an act of 1882 the Legislature of South Carolina chartered the Greenville & Port Royal Railroad Company. Sections 6 and 8 of this act authorized cites, towns, townships, and counties interested in the construction of railroads to subscribe to the capital stock of said railroad company, and to issue bonds in payment thereof. 18 St.at Large S.C.pp 216, 217. Section 9, as a means of paying the bonds, provided as follows:

'That for the payment of interest on such bonds as may be issued by the said counties, cities, towns or townships, the county auditor or other officer discharging such duties, or the city or town treasurer, as the case may be, shall be authorized and required to assess annually upon the property of such city, town, county or township such per centum as may be necessary to pay said interest of said sum of money subscribed, which shall be known and styled in the tax book as said railroad tax, which shall be collected by the treasurer under the same regulations as are provided by law for the collection of taxes in any counties, cities, towns or townships so subscribing and which shall be paid over by the said treasurer to the holders of said bonds as the said interest shall become due, on presentation of the coupons, which said coupons shall be reported to the county commissioners by the said treasurer, or to the council of any city or town where there are coupons from bonds of such city, or town, and all said coupons shall be cancelled by the county treasurer as soon as they are paid by them. ' Page 217.

In 1885, an amendatory act was passed in which the name of the railroad company was changed, and other alterations and changes were made, which do not concern the question at issue in this case. This act also amended the act of 1882 by adding the following provision to section 9:

'That for the purpose of this act, all the counties and townships in said counties, along the line of the said railroad, or which are interested in the construction as herein provided for, shall be, and they are hereby declared to be bodies politic and corporate, and vested with the necessary powers to carry out the provisions of this act, and shall have all the rights and be subject to all the liabilities in respect to any rights or causes of action growing out of the provisions of this act, the county commissioners of the respective counties are declared to be the corporate agents of the counties or townships so incorporated and situate within the limits of said counties.' 19 St.at Large S.C.p. 240.

This provision designates the county commissioners of the respective counties as the corporate agents of the counties and townships so incorporated, and clothes them with power to issue bonds in such amounts as may be authorized by the voters of the respective territories in the manner therein prescribed. In accordance with the provisions of this section, the people of the township, at an election held for that purpose, declared in favor of the issue of bonds in aid of the construction of the railroad, and the county commissioners of Abbeville county, in the spring of 1886, under the authority conferred upon them by the Legislature, issued the bonds of the township in the amounts stated in the petition. These bonds were sold to innocent purchasers for value, and for two years the taxes were regularly assessed and collected, and the interest upon the bonds was promptly paid. In November, 1888, the Supreme Court of South Carolina, in the case of Floyd v. Perrin, reported in 30 S.C., at page 1, 8 S.E. 14, 2 L.R.A. 242, held that under the statutes of 1882 and 1885 the township of Ninety-Six was created a corporation, but without any corporate purpose, and that the section of the act which undertook to authorize the issue of bonds was unconstitutional, and the township bonds were invalid. For 10 years prior to this decision a number of similar acts had been passed by the Legislature of the state in pursuance of which township bonds were issued in aid of railroads, and placed upon the market, and until the decision in the case supra there had been no question or doubt as to the validity of these bonds. At the next session of the Legislature an act was passed declaring that, when the railroad had been completed through the township, the township bonds issued in aid thereof should be paid by the taxation as provided in the original act. 20 St.at Large S.C.p. 12. This statute was held to be constitutional, and that a mandamus could be issued by that court to compel the collection of this tax. State v. Whitesides, 30 S.C. 579, 9 S.E. 6 61, 3 L.R.A. 772; State v. Harper, 30 S.C. 586, 9 S.E. 664; State v. Neely, 30 S.C. 587, 9 S.E. 664, 3 L.R.A. 672. The decisions in these cases practically settled the question in so far as the townships were concerned through which the railroad had been completed, and the interest was paid without further contest. On the other hand, the bonds of the townships through which the railroad had not been completed were not paid. On the 10th day of February, 1893, George W. Folsom brought suit against township Ninety-Six upon certain coupons clipped from its bonds. A demurrer was filed in behalf of the township, and Judge Simonton, in an opinion dated December 27, 1893, sustained the demurrer and dismissed the complaint. This case was carried to the Circuit Court of Appeals, and that court certified certain questions of law to the Supreme Court of the United States. The Supreme Court, in the fall of 1885, rendered a decision, which is reported in 159 U.S., at page 611, 16 Sup.Ct. 174, 40 L.Ed. 278, in which it is held that the decision in Floyd v. Perrin, having been rendered subsequently to the issue of the bonds in question, was not binding on the federal courts, and, considering the question upon its merits, the court held the statute was constitutional, and the bonds were valid, unless there was some other defense. The demurrer was overruled, and the defendant was allowed to file an answer. When the case came on for trial in the Circuit Court it resulted in a verdict for the plaintiff. The case was carried to the Circuit Court of Appeals, and the judgment below was affirmed. Ninety-Six Township v. Folsom, 30 C.C.A. 657, 87 F. 304. In the meantime other cases had been instituted against various townships, and judgment was obtained against the township in each case. A writ of error was sued out in one of them, and the judgment below was affirmed. Dunklin Township v. Wells, 31 C.C.A. 593, 87 F. 1004. These decisions terminated the litigation of this class of cases on the merits. In 1897 and 1899 acts were passed by the Legislature forbidding township commissioners, and all other officers from assessing any tax to pay these bonds, and forbidding the county treasurer and all other officers from collecting such tax. 22 St.at Large S.C.p. 534; 23 St.at Large S.C.p. 78. After these statutes were enacted, the auditor and treasurer declined to levy and collect the taxes as required by the statutes of 1882 and 1885, and the plaintiff in one of the cases filed a petition for a writ of mandamus. Judge Simonton, who delivered the opinion in Hicks v. Cleveland, 45 C.C.A. 429, among other things, said: 'The purpose of the General Assembly in passing the act to amend the charter of the Greenville & Port Royal Railroad Company, approved December 24, 1885 (19 St.at Large S.C.p. 237), was to promote the construction of that road. To accomplish this, it authorized and encouraged townships along the proposed line of road to subscribe bonds towards this construction. In order to give character and credit to these bonds, and to induce the public to invest in them, the ninth section of the act provides a careful, full and sure mode of providing for the interest. And an amendment to the same charter, made in 1887, provided (19 St.at Large S.C.p. 921) in the same way for the payment of the principal by taxation. These provisions of the act went into and formed a part of the contract moving to the bondholders, who invested their money trusting to the provision. The contract could not be impaired by any subsequent act on the part of the state of South Carolina.'

In this opinion Judge Simonton held that the acts of the Legislature which undertook to prevent the collection of the taxes in accordance with the provisions of section 9 of the acts of 1882 and 1885 were unconstitutional, and the judgment of the lower court directing the issuance of the writ of mandamus was affirmed. In the fall of 1891 an application was filed in the Supreme Court of South Carolina in behalf of certain taxpayers in the township of Dunklin, in which that court was asked to enjoin the county auditor and treasurer from levying and collecting the tax to pay the judgment which had been rendered. That court, on the 16th day of April, 1892, rendered its decision, in which it was held that a mandamus was in the nature of an execution to enforce a judgment of the federal court, and, among other things, it declared this 'was an end of the argument, as it cannot be contended that a state court can enjoin any process of a federal court. ' McCullough v. Hicks, 63 S.C. 542, 41 S.E. 761.

Section 11 of article 7 of the Constitution of 1895 provided:

'Each of the

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