Utter v. Franklin

• Decision Date: 03 January 1899
• Docket Number: No. 94,94
• Parties: UTTER et al. v. FRANKLIN et al
• Court: U.S. Supreme Court

172 U.S. 416

19 S.Ct. 183

43 L.Ed. 498

UTTER et al.

v FRANKLIN et al.

No. 94.

January 3, 1899.

This was a petition for a writ of mandamus to compel the defendants, who were, respectively, governor, auditor, and secretary of the territory, acting as loan commissioners, to issue certain bonds in exchange for bonds issued by the county of Pima in aid of the Arizona Narrow-Gauge Railroad Company.

The petition set forth that plaintiffs were the bona fide holders for value of certain 7 per cent. bonds and coupons issued in July, 1883, in compliance with an act of the territory 'to promote the construction of a certain railroad,' approved February 21, 1883, aggregating, including principal and interest thereon, the sum of $289,964.50. There was a further allegation in the petition that it was the duty of the defendants to provide for the redeeming of such indebtedness, and to issue refunding bonds therefor; that plaintiffs had made demands for the same, which defendants had refused.

Defendants demurred to the petition, and for answer thereto averred that the bonds now held by the plaintiffs had been declared, both by the supreme court of the territory and by this court, to be void, and therefore the petition of the relators should be dismissed.

The petition being denied by the supreme court of Arizona, the relators appealed to this court. No opinion was filed in the supreme court of the territory.

John F. Dillon and William H. Barnes, for appellants.

C. W. Wright, for appellees.

Mr. Justice BROWN, after stating the facts in the foregoing language, delivered the opinion of the court.

The bonds now held by the relators were declared to be invalid by this court in Lewis v. Pima Co., 155 U. S. 54, 15 Sup. Ct. 22, upon the ground that bonds issued in aid of railways could not be considered debts or obligations 'necessary to the administration of the internal affairs' of the county, within the meaning of the act of June 8, 1878 (20 Stat. 101).

Whether the loan commissioners of the territory can be required to refund these obligations, and issue new bonds to the holders thereof, depends upon the effect given to certain legislation upon this subject, both by congressional and territorial statutes. These statutes were enacted both before and after the decision in Lewis v. Pima Co., supra.

It seems that doubts were entertained as to the validity of bonds issued in aid of railroads, in view of the fact above stated, that under the congressional act of 1878 the power of municipalities to incur debts or obligations was limited to such as were necessary to the administration of their internal affairs. To put this question at rest, congress on July 30, 1886, passed an act to limit territorial indebtedness (24 Stat. 170), in the second section of which it was declared 'that no territory of the United States now or hereafter to be organized, or any political or municipal corporation, or subdivision of any such territory, shall hereafter make any sub- scription to the capital stock of any incorporated company, or company or association having corporate powers, or in any manner loan its credit to or use it for the benefit of any such company or association, or borrow any money for the use of any such company or association.' This section was undoubtedly designed to put a stop to the practice, which had grown quite common in the territories, of incurring debts in aid of railway and other corporations.

The fourth section provided for a limit of municipal indebtedness, and then declared 'that nothing in this act contained shall be so construed as to affect the validity of any act of any territorial legislature heretofore enacted, or of any obligations existing or contracted thereunder, nor to preclude the issuing of bonds already contracted for in pursuance of express provisions of law, nor to prevent any territorial legislature from legalizing the acts of any county, municipal corporation or subdivision of any territory as to any bonds heretofore issued or contracted to be issued.' This section evidently left the law where it stood before. It did not assume to pass upon the validity of any territorial act previously enacted, or of any obligations thereunder incurred, nor preclude the issue of bonds already contracted for under express provisions of law, leaving the courts to determine the validity of such acts and obligations, and the further question whether such bonds had been contracted for in pursuance of express provisions of law. It simply withheld its assent to, as well as its negative upon, such transactions, and declined to commit itself one way or the other. Nor did it assume to prevent the territorial legislature from legalizing the acts of any subordinate municipality as to bonds theretofore issued or contracted to be issued; leaving it to the territorial legislature to determine whether they should attempt to legalize such issues, and to the courts to pass upon the question whether this could be lawfully done. The bonds theretofore issued were left precisely where they stood before, and no attempt was made either to legalize or avoid them. Congress merely stayed its hand, and left the matter open for future consideration.

In this state of affairs the legislature of Arizona on March 10, 1887, passed an act (Rev. St. Ariz. p. 361) constituting the governor, auditor, and secretary of the territory loan commissioners of the territory, with the duty of providing 'for the payment of the existing territorial indebtedness, due and to become due, and for the purpose of paying, redeeming and refunding all or any part of the principal and interest, or either, of the existing or subsisting territorial legal indebtedness, with power to issue negotiable bonds therefor. This power, however, was limited to the legal indebtedness of the territory, and apparently had no bearing upon the indebtedness of its municipalities, certainly not upon indebtedness which had been illegally contracted. Indeed, the act is only pertinent as showing the authority under which the loan commissioners were appointed.

On June 25, 1890 (26 Stat. 175), congress passed an act approving with amendments this funding act of Arizona, 'subject to future territorial legislation,' the second section of which declared it to be the duty of the loan commissioners 'to provide for the payment of the existing territorial indebtedness due, and to become due, or that is or may be hereafter authorized by law, and for the purpose of paying, redeeming and refunding * * * the existing and subsisting territorial indebtedness,' etc. The tenth section of this act provided that the boards of supervisors of the counties, and the municipal and school authorities, should report to the loan commissioners of the territory their bonded and outstanding indebtedness, and that said loan commissioners should 'provide for the redeeming or refunding of the county, municipal and school district indebtedness, upon the official demand of said authorities, in the same manner as other territorial indebtedness, and they shall issue bonds for any indebtedness now allowed, or that may hereafter be allowed by law to said county, municipality or school district, upon official demand by said authorities.'

In compliance with the permit thus given by congress for future territorial legislation, the legislature of Arizona on March 18, 1891 (Laws 1891, p. 120), enacted a new funding act, only the following sections of which are material:

'Section 1. That the act of congress entitled 'An act approving with amendments the funding act of Arizona,' approved Jund 25, 1890, be, and the same is hereby, now re-enacted as of the date of its approval, subject to the modifications and additional provisions hereinafter set out, and to carry out the purpose and intention of said act of congress the loan commissioners of the territory of Arizona shall provide for the liquidation, funding and payment of the indebtedness existing and outstanding on the 31st day of December, 1890, of the territory, the counties, municipalities and school districts within said territory, by the issuance of bonds of said territory, as authorized by said act, and all bonds issued under the provisions of this act and the interest thereon shall be payable in gold coin of the United States.'

'Sec. 7. Any person holding bonds, warrants or other evidence of indebtedness of the territory or any county, municipality or school district within the territory, existing and outstanding on the 31st day of December, 1890, may exchange the same for the bonds issued under the provisions of this act at not less than their face or par value and the accrued interest at the time of exchange; but no indebtedness shall be redeemed at more than its face value and any interest that may be due thereon.'

It seems, however, that the existing legislation...