Louisiana v. Pilsbury

• Decision Date: 01 October 1881
• Citation: 26 L.Ed. 109,105 U.S. 278
• Parties: LOUISIANA v. PILSBURY
• Court: U.S. Supreme Court

105 U.S. 278

105 U.S. 278

26 L.Ed. 109

LOUISIANAv.PILSBURY.

October Term, 1881

ERROR to the Supreme Court of the State of Louisiana.

This was a petition of the State of Louisiana, on the relation of the Southern Bank, a corporation created under its laws and doing business in New Orleans, to one of its District Courts, for a mandamus to compel the municipal authorities of that city to levy a special tax to pay certain coupons on outstanding bonds issued under an act of the State in 1852, and to purchase the bonds with any surplus remaining of the moneys collected.The history of the issue of the bonds is as follows: The city of New Orleans was originally incorporated by an act of the legislature in 1805, and its charter continued in force until the 8th of March, 1836.An act was then passed which divided the city into three municipalities, each of which was created a distinct corporation, with 'such rights, powers, and capacities as are commonly incident' to municipal bodies.This division continued until Feb. 23, 1852, when, by an act known as act No. 71 of that year, and entitled 'An Act to consolidate the city of New Orleans and to provide for the government and administration of its affairs,' the three municipalities were again united into one.The act of 1836 provided that a proportionate part of the debt of the city should be paid by each municipality, the quota being fixed upon the basis of the amount of taxes and other revenue accruing to it.The separate municipalities subsequently created debts; and the act of Feb. 23, 1852, provided for the issue of bonds for the payment of those debts, and also for the debt of the old city.The thirty-seventh section, which dealt with this subject, is as follows:——

'SECT. 37. Be it enacted, &c., that the debt of the general sinking fund, commonly called the old city debt, and the debts of the three municipalities, whether in the form of bonds, notes, interest coupons, cash warrants, or other species of obligation whatever, shall be assumed and paid by the city of New Orleans, and said city is hereby declared liable therefor.The mayor, comptroller, and treasurer, and chairmen of the finance committees of the two boards of the common council, shall constitute a commission, to be called the commissioners of the consolidated debt of New Orleans; and they shall have power to issue bonds of the city of New Orleans, having not more than forty years to run, with interest payable at such place as may be agreed on between said commissioners and the parties to whom the bonds are issued, in semi-annual coupons in exchange for any bonds, obligations, or debts of the old corporation, or of any of the old municipalities, whether matured or not, or to sell the new bonds and apply the proceeds to the payment of the matured debts of the old corporation or of the municipalities, but to no other purpose.The bonds thus issued shall form a stock to be called the consolidated debt of New Orleans.At the time this act goes into operation, an exact and detailed statement of the indebtedness of the old corporation and of each municipality shall be filed in the office of the comptroller, by the secretary of the board of liquidators and the municipal comptrollers respectively, when the commissioners of the consolidated debt shall proceed to divide the debt of the old corporation between the several municipalities, in proportion to the assessed value of real estate within the limits of each, according to the State assessment roll for 1851.The amount thus apportioned to each, together with its individual indebtedness at the time this act goes into operation, shall constitute the separate debt of each municipality, and shall be known as the debt of municipality No. one, No. two, No. three.The common council shall, annually, in the month of January, pass an ordinance to raise the sum of six hundred thousand dollars, by a special tax, on real estate and slaves, to be called the consolidated loan tax, and the rate per cent of said tax, in each municipality, shall be in proportion to the indebtedness of each.All ordinances, resolutions, or other acts passed by said council, after the first day of January in each year, shall be null and void, unless the ordinance imposing the consolidation loan tax shall have been previously passed.At the end of each and every year, any surplus of the consolidated loan tax remaining in the treasury, after the payment of all the interest and the expenses of the management of said debt, shall be applied to the purchase, from the lowest bidder, of such bonds issued under this act, as have the shortest period to run; and the common council shall have the right of rejecting all bids demanding more than the face of the bonds; for which purpose, public notice shall be given by the comptroller in the official gazette for thirty days, inviting proposals from bondholders for the sale, to the city, of the bonds herein described.From and after the passage of this act no obligation or evidence of debt of any description whatever, except those herein authorized, shall be issued by the city of New Orleans or under its authority; nor shall any loan be contracted, unless the same be authorized by a vote of a majority of the qualified voters of said city, which shall be taken in the manner prescribed by the city council, after ten days proclamation by the mayor, in the news- paper chosen by the common council; and no ordinance creating a debt or loan shall be valid, unless such ordinance shall prescribe ways and means for the punctual discharge at maturity of the capital borrowed or debt incurred; and such ordinances shall not be repealed until principal and interest of the capital borrowed or the debt incurred are fully paid and discharged.'

By a supplementary act approved on the same day, known as No. 72 of the year, the adjacent city of Lafayette was added to the city of New Orleans, and provision was made for the assumption and payment of its debt.The fifth section of the act is as follows:——

'SECT. 5. Be it further enacted, &c., that the debt of the city of Lafayette shall be assumed and paid by the city of New Orleans, and the said city of New Orleans is hereby declared liable therefor; and the amount of said debt shall be ascertained, and its payment provided for and made in the same manner as the debt of each municipality of New Orleans is ascertained and provided for in the act to which this act is a supplement; and in raising annually the consolidation loan tax for the payment of the debt of New Orleans, an additional sum of fifty thousand dollars shall be raised for the purpose of providing for the debt of the city of Lafayette, now added to that of New Orleans, so that the whole amount of the annual levy of taxes for the payment of the debt of New Orleans shall be six hundred and fifty thousand dollars.'

Under these acts, No. 71andNo. 72, the commissioners of the consolidated debt issued bonds of the city of New Orleans, known as consolidated bonds, to the amount of ten million dollars, in exchange for the bonds, obligations, and debts of the old city, of the three municipalities, and of the city of Lafayette.Of this amount bonds exceeding five million dollars have been paid by funds received under the tax levied pursuant to the provisions of the thirty-seventh section of act No. 71 and of the fifth section of act No. 72, beyond what was necessary to meet the annual interest.There remain outstanding bonds for more than four million dollars, with interest since 1876.Of these bonds, with unpaid coupons, the relator owns upward of six hundred, each for the sum of one thousand dollars.

The petition refers to the actsNo. 71andNo. 72 of 1852, and cites at length the sections mentioned.It also alleges that the bonds issued under them were negotiable secutrities; that by reason of the law providing for the payment of the interest and the gradual reduction of their number through a sinking fund, they were negotiated at their par value or above it, and distributed in the markets of Europe and of the United States in the due course of business as a secure, permanent, and trustworthy investment; that the free banks of the State were compelled to invest in them to secure the circulation of their bills, and that individuals and corporations did likewise with confidence in the provisions of sect. 37 of act No. 71, andsect. 5 of act No. 72, for the maintenance and enforcement of which the public faith of the State of Louisiana and of the city of New Orleans was inviolably pledged.

The petition then alleges that, in violation of the provisions of law mentioned, which constitute a contract with the bondholders, binding both upon the State of Louisiana and the city of New Orleans, the legislature of the State, on the 12th of March, 1874, passed an act entitled 'An Act to postpone the levy and collection by the city of New Orleans of a tax for a sinking fund for the purchase of its bonds, to authorize the administrators of the city to modify the last budget and tax levy, and to repeal conflicting laws and penalties,' the object of which was to relieve the authorities of the city until December, 1876, from the duty of estimating, levying, and collecting any tax for a sinking fund for the purpose of purchasing any of the bonds issued under the acts mentioned.

The petition also alleges that, in further violation of the provisions of the act of 1852, and of the contract with the holders of the bonds, the legislature, on the 6th of March, 1876, passed another act, designed, as stated in its title, to adjust, requlate, and provide for the bonded debt of the city of New Orleans, and authorize the exchange of its bonds for other bonds to be issued on the plan known as the premium bond plan, the avowed object of which was to impair, if possible, the obligation of the contract between the bondholders and the city, and divest the rights acquired by them under it, by...