Harsha v. City of Detroit

• Decision Date: 31 January 1933
• Docket Number: No. 161.,161.
• Citation: 261 Mich. 586,246 N.W. 849
• Parties: HARSHA v. CITY OF DETROIT et al.
• Court: Michigan Supreme Court

261 Mich. 586

246 N.W. 849

HARSHA

v.CITY OF DETROIT et al.

No. 161.

Supreme Court of Michigan.

Jan. 31, 1933.

Appeal from Circuit Court, Wayne County, in Chancery; Guy A. Miller, Judge.

Suit by Daisy E. Harsha against the City of Detroit and others. Decree in favor of the defendants, and the plaintiff appeals.

Affirmed.

Argued before the Entire Bench.

John R. Rood, of Detroit, for appellant.

Clarence E. Wilcox, Corp. Counsel, and Paul T. Dwyer, Asst. Corp. Counsel, both of Detroit, for appellees.

Hal H. Smith. Archibald Broomfield, and Beaumont, Smith & Harris, all of Detroit, amici curiae.

POTTER, J.

Plaintiff, a citizen, resident, and taxpayer of the city of Detroit, a municipal corporation, by bill in equity for a declaratory decree and injunction, claims she is the holder of a bond of defendant city issued subject to the provisions of Act No. 279, Public Acts 1909, which limited the rate of taxation on the assessed value of the real and personal property in defendant city to 2 per cent. per annum, and limited the power of defendant city to borrow money on the credit of the city to 8 per cent. of the assessed valuation of the real and personal property in the city; that by Act No. 203, Public Acts of 1911, the limit of the rate of taxation and of bonded indebtedness was continued, but by Act No. 126, Public Acts 1929, though the rate of taxation was continued as before, the limit of the defendant city's power to borrow money was raised to 10 per cent. of the assessed valuation of the real and personal property in the city; that the limit of taxation and of bonded indebtedness was not changed by Act No. 1 of the Public Acts of the Second Extra Session of the Legislature of 1932, and that Act No. 126 of the Public Acts of 1929 and Act No. 1 of the Public Acts of the Second Extra Session of 1932 are void as against plaintiff, because they impair the obligation of her contract, evidenced by her bond, in violation of the provisions of the Constitutions of this state and of the United States (Const. Mich. art. 2, § 9; Const. U. S. art. 1, § 10) prohibiting the passage of laws impairing the obligation of contracts.

She contends: ‘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 of it, as fully as if they had been expressly referred to or incorporated in its terms. This principle embraces alike those laws which affect its construction and those which affect its enforcement or discharge.’ Farmers' & Merchants' Bank v. Federal Reserve Bank, 262 U. S. 649, 43 S. Ct. 651, 655, 67 L. Ed. 1157, 30 A. L. R. 635. She seeks decree holding such later legislation void and injunction against the issuance of refunding bonds under Act No. 1 of the Public Acts of the Second Extra Session of 1932 and other relief. Defendants admit the facts, but deny the legislation complained of impairs the obligation of plaintiff's contract. There was decree for defendants. Plaintiff appeals.

The legislative power is the authority to make, alter, amend, and repeal laws. Cooley, Const. Lim. (8th Ed.) 183. In this state, it is coextensive with that of the Parliament of England, save as limited and restrained by the state and federal Constitutions. Cooley, Const. Lim. (8th Ed.) 177; 12 C. J. 749. One Legislature cannot limit or restrict the power of its successor. 12 C. J. 806. The Constitution of this state provides: ‘The legislature shall provide by a general law for the incorporation of cities, and by a general law for the incorporation of villages; such general laws shall limit their rate of taxation for municipal purposes, and restrict their powers of borrowing money and contracting debts.’ Section 20, art. 8, Const. 1908. ‘Under such general laws, the electors of each city any village shall have power and authority to frame, adopt and amend its charter and to amend an existing charter of the city or village heretofore granted or passed by the legislature for the government of the city or village and, through its regularly constituted authority, to pass all laws and ordinances relating to its municipal concerns, subject to the Constitution and general laws of this state.’ Section 21, art. 8, Const. 1908.

Corporate charters in which no power of amendment or repeal is retained, when accepted, constitute contracts between the state and the corporation. Dartmouth College v. Woodward, 4 Wheat. 518, 4 L. Ed. 629. This rule applies to private corporations only. Municipal corporations are state agencies, and subject to constitutional restrictions, the Legislature may modify the corporate charters of municipal corporations at will. 12 C. J. 1031. Powers are granted to them as state agencies to carry on local government. The state still has authority to amend their charters and enlarge or diminish their powers. Cooley, Const. Lim. (8th Ed.) 393. ‘They derive all their powers from the source of their creation; and those powers are at all times subject to the control of the legislature. Such powers, also, in the absence of any constitutional regulation forbidding it, may be enlarged, * * * extended or curtailed, or withdrawn altogether, as the legislature shall determine.’ Rogers v. Burlington, 3 Wall. (70 U. S.) 654, 663, 18 L. Ed. 79.

The power to impose taxes is vested exclusively in the legislative department of government and cannot be exercised except in pursuance of its authority. The levying of taxes is solely the function of the Legislature. 37 Cyc. 724. Subject to constitutional restrictions, ‘it must be taken as generally true that the power to tax is limited in extent, in purpose, and in methods only by the will of the state as expressed in its laws.’ 1 Cooley on Taxation (3d Ed.) 178; 2 Smith, Modern Law of Mun. Corp. par. 1477.

Fixing the limit of municipal indebtedness is delegated by the Constitution of this state to the Legislature, which has full power and authority to increase it by general law. 44 C. J. 1117; 6 McQuillin, Mun. Corp. p. 2, par. 2366; Wharton v. City of Greensboro, 149 N. C. 62, 62 S. E. 740. The Legislature may regulate the amount of municipal indebtedness and the rate of taxation of cities. It is expressly authorized by section 20, art. 8, of the Constitution so to do. Its powers are plenary. It may increase or decrease the limit of bonded indebtedness and the rate of taxation for municipal purposes, subject to the prohibition in the Constitutions of this state and of the United States that such legislation shall not operate directly upon contracts so as to impair their obligation by abrogating or lessening the means of their enforcement. United States ex rel. Wolff v. New Orleans, 103 U. S. 358, 26 L. Ed. 395. There is no constitutional provision against changing the limit of bonded indebtedness or limiting the rate of taxation for municipal purposes which in cities under the Home Rule Act (Pub. Acts 1909, No. 278) obtained when plaintiff acquired her bond. She had no contract with the state or with defendant city that the limit of bonded indebtedness or the rate of taxation for municipal purposes might not be changed. She was bound to know the legislative power of the state, over the limit of bonded indebtedness and the rate of taxation for municipal purposes of defendant city contained in the Constitution, and that the Legislature possessed full power and authority by legislative action to increase the limit of the defendant city's power to borrow money and the rate of taxation for municipal purposes. Her contract was at all times subject to the right of the state, through its legislative department, to exercise its constitutional powers and functions.

As early as Dartmouth College v. Woodward, 4 Wheat. 518, 4 L. Ed. 629, Justice Storey pointed out that where the right to alter, amend, or repeal a statute existed, it must be held to be a part of a contract based thereon, and the subsequent exercise of that right would be in accordance with the contract and could not impair its obligation. This principle has been repeatedly recognized. Greenwood v. Union Freight R. Co., 105 U. S. 13, 26 L. Ed. 961;Hamilton Gaslight & Coke Co. v. Hamilton, 146 U. S. 258, 13 S. Ct. 90, 36 L. Ed. 963. The Constitution of this state provides: ‘The power of taxation shall never be surrendered or suspended by any grant or contract to which the state or any municipal corporation shall be a party.’ Section 9, art. 10, Const. 1908.

In its explanation of the proposed changes in the Michigan Constitution and the reasons therefor, the Constitutional Convention of 1908 said: ‘This is a new section and forever prohibits the surrender or suspension of the taxing power of the state or any municipality therein.’

In City Commission of City of Jackson v. Vedder, 209 Mich. 291, 176 N. W. 557, it was held (quoting syllabus): ‘Under the Constitution (Art. 8, §§ 20, 21) authorizing the legislature to provide by a general law for the incorporation of cities and to restrict their powers of borrowing, the question of the bonding limits of cities is a legislative one over which they have no control except as provided in the enabling act.’ Plaintiff's contract is not impaired unless by the state exercising its legislative power to amend the Home Rule Act by increasing the limit of the restrictions upon cities for borrowing money. The argument in her behalf amounts to saying plaintiff's contract is impaired by the lawful exercise of the legislative power of the state. Missouri Pacific Railroad Co....