New York Life Ins. Co. v. Board of Com'rs of Cuyahoga County, Ohio

• Decision Date: 08 January 1901
• Docket Number: 826.
• Parties: NEW YORK LIFE INS. CO. v. BOARD OF COM'RS OF CUYAHOGA COUNTY, OHIO.
• Court: U.S. Court of Appeals — Sixth Circuit

106 F. 123

NEW YORK LIFE INS. CO. v. BOARD OF COM'RS OF CUYAHOGA COUNTY, OHIO.

No. 826.

United States Court of Appeals, Sixth Circuit.

January 8, 1901

This suit was brought to recover an amount equal to the sum of the amounts specified in certain negotiable bonds issued by the county of Cuyahoga, Ohio, for the purpose of purchasing a site and building an armory thereon in the city of Cleveland. The case was disposed of in the circuit court upon a demurrer to the petition. The facts, as alleged in the petition and admitted by the demurrer, are these: On the 27th of April 1893, the legislature of Ohio passed an act entitled 'An act to authorize the commissioners of any county, containing a city of the first class, second grade, to borrow money and issue bonds therefor, for the purpose of building and furnishing a central armory in any such city for the use of the Ohio National Guard, and procure a site therefor. ' It is unnecessary to recite the act at length, as it is not questioned that in form and language, at least, it was sufficient to authorize the issue of the bonds above mentioned, and bind the county for the payment thereof. The county of Cuyahoga, which was the only one in the state answering to the description of counties authorized by the act, by a resolution of its board of commissioners adopted May 13, 1893, determined to issue its bonds in the sum of $225,000 for the purpose of procuring a site and building an armory. Bonds to that amount in the denomination of $1,000 each, bearing date July 1, 1893, with coupons attached for interest at 5 per cent. per annum, payable semiannually, were issued and sold for their full value at par some time in September of the same year. One hundred and forty-five of these bonds were subsequently purchased in the open market at a premium by the plaintiff, in good faith, and without notice of any infirmity therein other than such as might be imputed to the purchaser by law. Interest falling due on the 1st days of January and July in the years 1894 and 1895, respectively, was duly paid. With the proceeds of the bonds a site in the city of Cleveland was purchased, the title being taken in the name of the county, and an armory was built, which was nearly completed at the time this suit was commenced. The county has been in the possession and occupancy of the site since it was acquired, and of the building during its erection, exercising the rights of ownership and control. Of the sum borrowed, there remains in the treasury of the county, unexpended, $17,755.30. After the money had been borrowed, the site acquired, and the building substantially completed, a taxpayer of the county instituted legal proceedings in a court of the state of Ohio, against the county authorities, to restrain the further levy of taxes to pay the bonds, upon the ground that the law which was supposed to authorize them was in conflict with the constitution of the state, and therefore invalid. Such proceedings were that upon the final determination thereof by the supreme court of the state the statute was held to be unconstitutional, and a decree was rendered in favor of the plaintiff in that suit, that the county authorities be restrained as prayed. Hubbard v. Fitzsimmons, 57 Ohio St. 436, 49 N.E. 477. Thereupon the legislature of the state, on the 21st of April, 1898, passed the following act now section 2834c of the Revised Statutes of Ohio 'Whenever the commissioners of any county, acting in accordance with the act of the legislature, have incurred obligations or have issued and sold bonds, and with the proceeds of such obligations or bonds have constructed an improvement or purchased land, and have wholly or partially completed a building thereon, and, after such proceeds have been so expended, and the county thereby placed in the ownership and possession of such improvement or building, the statute under which such bonds were issued or obligations incurred has been, by the supreme court, declared unconstitutional, and the county authorities enjoined from levying taxes to pay the interest and principal of such bonds or obligations, whereby the county has, with the proceeds of the bonds which it still retains, acquired such improvements or building, and, by reason of the unconstitutionality of the law under which it has acted, can not pay its obligations outstanding in the form in which they were issued, such commissioners may, if they deem it for the best interest of the county so to do, fulfill the equitable and moral obligations of the county to reimburse the holders of said bonds or obligations to an amount equal to the principal and interest which has accrued thereon, and for the purpose of so doing may issue and sell bonds of such county, or borrow money in such amount and for such lengths of time and at such rate of interest as the commissioners may deem proper, not exceeding the rate of 5 per centum per annum, payable semi-annually, to be used in the reimbursement and payment of such equitable and moral claims and liabilities against such county: provided, that no such payment or reimbursement of any such moral or equitable claim shall be made of any claim that has remained due or unpaid for a longer period than ten years: provided, further, that should the county commissioners of any county, upon the written request of the holder of any such equitable claim against the county, as in this section described, fail, within six months after such demand, to make provision for such claim under the provisions of this section, then, in such case, the holder of any such legal or equitable claim, as in this section described, against such county, shall have a right of action in any court of competent jurisdiction to recover the amount of such claim and interest against such county at any time within a period of ten years from the time the cause of action accrues: provided, further, that the county commissioners may devote the building or improvement, which the county has acquired in the circumstances mentioned in this act, to any county purpose. ' On the 27th of February, 1899, the plaintiff made a demand upon the county board to reimburse it according to the authorization of the act, by paying or providing for the payment of the bonds held by the plaintiff. This the board refused, and the plaintiff was notified by the board that no proceedings for the reimbursement of the plaintiff would be taken. Six months after this refusal having elapsed, this suit was brought. To a petition alleging substantially these facts the defendant demurred, the grounds assigned being as follows: '(1) Said petition does not contain facts sufficient to constitute a cause of action against the defendant. (2) Because the enactment of the statute (section 2834c of the Revised Statutes of Ohio) under favor of which said action has been brought is not authorized, but is prohibited, by the constitution of the state of Ohio, especially by section 28 of article 2, which prohibits the enactment of retroactive laws, and by section 2 of article 12, which requires that taxes which are to be devoted to general purposes must be levied upon all the taxable property within the state. (3) Because the enactment of the statute (section 2834c of the Revised Statutes of Ohio) is in violation of section 10 of article 1 of the constitution of the United States, which prohibits a state from passing any law impairing the obligations of contracts, and is also in violation of section 1 of article 14 of the constitution of the United States, which prohibits any state from depriving any person or property without due process of law, or denying to any person equal protection of the laws. ' Upon the hearing of the demurrer it was sustained by the court, the judge presiding being of opinion that the act of April 21, 1898, was in conflict with the constitution of Ohio, and the petition was thereupon dismissed. 99 F. 846. The plaintiff brings the case here upon a writ of error.

Henry A. Garfield, for plaintiff in error.

P. H. Kaiser, for defendant in error.

Before HARLAN, Circuit Justice, SEVERENS, Circuit Judge, and THOMPSON, District Judge.

SEVERENS Circuit Judge, having stated the case as above, .

The grounds upon which the learned judge sustained the demurrer to the plaintiff's petition, as indicated by his opinion sent up with the transcript, were two: First, that the act of April 21, 1898, was in conflict with the provision contained in section 28 of article 2 of the constitution of the state, which prohibits the enactment of retroactive laws; and, second, that it was in conflict with section 2 of article 12 thereof, which provides that taxes which are to be devoted to general purposes shall be levied upon all the taxable property within the state. And these are the principal grounds relied upon by the defendant in error to sustain the judgment.

The conclusion that the act was retroactive is based upon the theory that, there having been no vested right at the time it was passed to recover the money loaned, the legislature created a liability upon a transaction which had been already closed, and in which no liability had been incurred by the county. But this, we think, is a misconception of the purpose of the act, as well as of the nature of the facts upon which it proceeded. It was not intended to declare that the past transaction created a contract or imposed any legal liability, but that a moral obligation had arisen, which it was then incumbent upon the legislature to provide the means to discharge by the exercise of its power of taxation. The power of the legislature to raise taxes to meet obligations whether legal or moral only, is not restricted to such obligations as shall be thereafter incurred. It is not questioned that the legislature of Ohio...