Meriwether v. Garrett

CourtUnited States Supreme Court
Citation26 L.Ed. 197,102 U.S. 472
Decision Date01 October 1880

APPEAL from the Circuit Court of the United States for the Western District of Tennessee.

On Feb. 28, 1879, Robert Garrett and others filed their bill in the court below against the City of Memphis, Tennessee, setting forth that they are the owners and holders of overdue and unpaid bonds and coupons and other evidences of her indebtedness to the amount of more than $100,000, upon much of which indebtedness they have secured judgments and writs of mandamus to compel the collection thereof, but that, owing to the malfeasance, misfeasance, and incompetency of her officers charged with the collection of taxes, a large proportion of those assessed and levied for many years past, and amounting to at least $2,500,000, are uncollected and unpaid, by reason of which she is insolvent; that her persistent failure to collect them is a fraud upon her creditors; that during each of the years 1875, 1876, 1877, and 1878 a large levy of taxes was made in obedience to writs of mandamus, but that by reason of her failure during each of those years to collect more than three-fifths of the amount thereof, and also of the taxes assessed and levied for general purposes, a large amount represented by the judgments remains unpaid; that the special levies so made, in which the complainants have a large interest, constitute a trust fund for the payment of their judgments which can only be used for that purpose, and that the city's neglect and failure to press the collection thereof is a fraud upon them, against which a court of equity will relieve; that, outside of the power of a court to appoint a receiver to take charge of the assets of the city and collect the taxes so levied, it is, by an act of the legislature of Tennessee passed March 19, 1877, entitled 'An Act to enable municipal corporations having more than thirty-five thousand inhabitants to settle their indebtedness,' being chapter 71 of the acts of 1877, provided that upon the application of any person or persons who are the holders of any past-due and unpaid bonds, coupons, or other indebtedness, not less in amount than $100,000, of any municipal corporation having more than thirty-five thousand inhabitants, it shalll be the duty of the Court of Chancery to appoint a receiver for such corporation; that the city's indebtedness, represented by judgments and otherwise, amounts to over $850,000, and that her population exceeds thirty-five thousand persons. They, therefore, pray that a receiver be appointed to take charge of her assets, including her tax books and bills for past-due and imposed taxes, and that he be clothed with the power conferred by said act of March 19, 1877, and such other power as may be necessary to enable him to collect all outstanding indebtedness and claims of every kind due to her, and to settle her debts, particularly those due to the complainants.

Chapter 71 of acts of 1877 enacts as follows:——

'SECT. 2. That the power to levy taxes of every description, and for any and every purpose whatever, is hereby taken away from said municipal corporations, and each and every officer and representative thereof, and said taxing power lodged in the legislature of the State, and not elsewhere; and that by virtue of article 11, section 9, of the Constitution of the State, in addition to the powers already conferred, the Chancery Court, for the purpose of settling the indebtedness of Memphis and other municipal corporations containing more than thirty-five thousand inhabitants, may appoint a receiver, and exercise such other powers as are hereinafter srt forth.

'SECT. 3. That upon the application of any person or persons, who are the holders and owners of any past-due and unpaid bonds, coupons, or other indebtedness of said municipal corporations, not less in amount than one hundred thousand dollars, it shall be the duty of the Chancery Court to appoint a receiver for said municipal corporations, who, as the officer of the court, and not otherwise, shall, under the order and instruction of the court, act for such municipal corporations.

'SECT. 4. That said receiver, together with two other citizens and property holders of said corporation, to be appointed by the court, shall constitute a commission to settle and compromise the indebtedness of said municipal corporation, by funding the same, at a rate not exceeding fifty-five cents in the dollar on judgments, and not exceeding fifty cents in the dollar for bonds or coupons past due, and at a less rate for the less valuable class of said indebtedness; and upon their action being confirmed by the court, the court shall direct the receiver to execute the necessary and proper compromise bonds and contracts; which bonds, when so executed, shall to all intents and purposes be the valid and binding obligations of said corporation; but it is understood and agreed that the holders of any of the bonds issued by the receiver as provided in this act shall have the option, after two years, to fund or exchange them at par, into bonds payable thirty years after the date of their issue, and bearing interest at the rate of six per cent per annum; said bonds shall be of the denomination of one thousand dollars each, and numbered consecutively from one to twenty-five hundred; the total amount of bonds issued under this act shall not exceed two and one-half millions of dollars.

'SECT. 5. That in order to enable said commission to make a settlement of said municipal indebtedness, as contemplated, it is hereby enacted:——

'1. That all bonds and matured coupons and judgments, and all paving scrip certificates issued by said corporation, and all receipts for money paid by tax-payers to paving contractors for making Nicholson and stone pavement, &c., by virtue of any contracts with said corporation, may be funded at such a rate not exceeding the maximum above mentioned, and into such bonds, bearing not exceeding six per cent per annum interest, as may be agreed on between the parties, the holder, and said commission.

'2. That all matured bonds and coupons, issued by virtue of any agreement made in pursuance of this act, shall be receivable for taxes, city dues, and indebtedness of every kind.

'3. That said municipal corporations are hereby prohibited from issuing scrip at any time, or bonds, while any bonds issued under this act are outstanding, except such as may be issued in exchange, as hereinbefore provided in section 4 of this act.

'4. That, hereafter, for said municipal corporations, there shall not be levied a higher rate of taxation for general purposes, as defined in the charter, than one per cent for the next five years, and at no time thereafter for said purposes a tax exceeding one dollar and twenty-five cents on the hundred dollars.

'5. That an ample interest and sinking-fund tax shall be levied annually, and collected, to meet the maturing interest and retire and pay the bonds issued under this act, and that this tax shall be faithfully applied to the object proposed. The sinking-fund tax shall be paid into the hands of three sinking-fund commissioners, and the interest tax shall be paid into the hands of three interest commissioners; each and all of said sinking-fund and interest commissioners shall be appointed by the court, and shall be citizens of established integrity and responsibility, who shall give bond in sufficient amounts to cover the funds coming into their hands, and take an oath to faithfully execute their trusts; said bonds to be fixed by the court.

'6. That the provisions of this act may be made a part of the contract with the holders of any bond or coupon issued by reason of any agreement made under this act.

'7. That so much of sects. 38, 63, 64, and 66 of an act passed March 20, 1875, and all other acts as are in conflict with the provisions of this act, are hereby expressly repealed.

'SECT. 6. That the court shall appoint the interest and sinking-fund commissioners, and supply all official vacancies as they may occur in the different municipal departments, which, as to the ordinances affecting the same and in every other respect, remain unaffected, except in so far as they may conflict with the enforcement of the provisions of this act, in which event the court will so order as to carry out the true intent and purposes of this act: Provided, however, that all the offices not abolished by this act be filled by a popular vote, for the term of two years, at the time designated in the charter for the next regular municipal election.

'SECT. 7. That to carry into effect the true intent and provisions of this act, the legislature of the State hereby levies an annual tax of one dollar and sixty cents on each one hundred dollars' worth of taxable property and values within said municipal corporation (including the school tax, which shall not exceed ten cents), to be applied under the order and directions of the court in the payment of current expenses, interest on compromise bonds and the extinguishment of the indebtedness of said municipal corporations.

'SECT. 8. That this act shall take effect, and not before, when the sum of the tax mandamuses outstanding against any one of said municipal corporations shall amount in the aggregate to the sum of [850,000) eight hundred and fifty thousand dollars.

'Passed March 19, 1877. Approved March 23, 1877.'

On the day next after that upon which the complainants' bill was filed, the legislature of Tennessee passed the following acts: —


'An Act to repeal the Charters of certain Municipal Corporations, and to remand the Territory and Inhabitants thereof to the Government of the State.

'SECT. 1. Be it enacted by the General Assembly of the State of Tennessee, that an act passed Dec. 1, 1869, entitled 'An Act to reduce the charter of the city of Memphis and the several acts amendatory thereof into one act,' being chapter 26 of the private...

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