Warner v. City of New Orleans

• Decision Date: 17 May 1898
• Docket Number: 691.
• Citation: 87 F. 829
• Parties: WARNER v. CITY OF NEW ORLEANS.
• Court: U.S. Court of Appeals — Fifth Circuit

87 F. 829

WARNER v. CITY OF NEW ORLEANS.

No. 691.

United States Court of Appeals, Fifth Circuit.

May 17, 1898

The legislature of the state of Louisiana, by an act approved March 18, 1858, established a system of drainage of certain portions of the parishes of Orleans and Jefferson, which was to be carried on by boards of commissioners appointed for the three drainage districts into which the territory was divided. The commissioners were required to prepare plans of the proposed work, giving the names of the proprietors of the lands to be drained, which were to be filed in the mortgage office. The act further provided that notice of the filing of the plans should be given by publication, and that, upon the application of the commissioners to the courts specified in the act, judgments should be entered decreeing the lands subject to a first mortgage lien and privilege for such amount as might be assessed for drainage purposes. By a supplemental act approved March 17, 1859, the commissioners were authorized to borrow money to carry on the work. By another act, approved March 1, 1861, the prior acts were amended for the purpose of providing a mode of enforcing assessments when made, and for that purpose authorizing the commissioners to apply to certain courts for the approval and homologation of the assessment rolls, which approval and homologation the act declared 'shall be a judgment against the property assessed and the owners thereof, on which execution may issue as on judgments rendered in the ordinary mode of proceeding. ' The commissioners made plans of the work proposed to be done, including therein the streets, squares, and public places within the several districts, as the property of the city of New Orleans; and from time to time judgments were rendered charging these public places, as well as private property, with the amounts that might be assessed for drainage purposes. Subsequently assessments were made, in some districts by the commissioners, and in others by the board of administrators of the city of New Orleans, which succeeded them under the act of 1871; and judgments were rendered for the amounts assessed against the lands and the owners, pursuant to the act of 1861. These assessments in every instance included the streets, squares, and public places, and the city of New Orleans, as the proprietor thereof. In 1871 the legislature by Act No. 30 of that year, abolished the several boards of drainage commissioners, transferring all the assets and everything appertaining to the drainage districts to the board of administrators of the city of New Orleans, which was subrogated to all the rights and powers and facilities then possessed by the commissioners; and the board was directed to collect the balance due on assessments, as shown by the books of the First, Second, and Third drainage districts 'which said assessments are hereby confirmed and made exigible at such time and in such manner as the board of administrators may designate. ' The act further authorized the board of administrators to make other assessments, and required it to place all collections of drainage assessments to the credit of the Mississippi &amp Mexican Gulf Ship Canal Company,-- said company being the corporation charged under the act with the drainage work,-- and hold the same as a fund to be applied to drainage purposes. Under these several acts, assessments were made against the city on the area of the streets and other public places within the drainage districts, and reduced to judgment, to the amount of $696,349.30, and against private persons to the amount of $1,003,342.28, of which about $230,000 has been collected from private property, in cash and drainage warrants; leaving outstanding at the date of the filing of the bill in this case uncollected assessments to the amount of $1,469,714.47, of which the city owes $696,349.30. The canal company carried on the work until 1872, when it transferred its franchise, drainage boats, and machinery to Warner Van Norden, who thereafter continued the work, receiving warrants against the drainage fund in payment of the amount earned. In 1876, after more than two-thirds of the drainage system had been completed, the legislature, by Act No. 16 of that year, authorized the city of New Orleans to acquire, if the council deemed it advisable, the property and franchise of the canal company, or its transferee, at a valuation to be affixed by appraisers to be appointed by itself; the price to be paid in warrants drawn against the drainage assessments. The same act granted the city the right and power thereafter to do all necessary drainage work, in case it should make the purchase. The city availed itself on this authority, and on the 6th day of June, 1876, made the purchase at an appraised value of $300,000, and issued drainage warrants to that amount to Van Norden for the price; covenanting in the act of sale not to obstruct or impede, but on the contrary to facilitate by all lawful means, the collection and application of the drainage assessments to the payment of the purchase warrants.

On this state of facts the complainant, as holder of $6,000 of these warrants, brings this suit. The bill, after reciting these facts, avers, in substance, that upon acquiring the drainage plant and franchises of the canal company the city abandoned all drainage work, and suffered the dredge boats and machinery purchases as above stated to decay and become valueless, and that by reason of the city's failure to complete the drainage and benefit the lands the courts have refused to enforce the collection of the assessments; that, having thus abandoned all drainage work, the city, by its ordinances and by a proclamation of the mayor, then advised property holders not to pay the assessments; and that in consequence of these ordinances and said proclamation, and the decisions of the courts, the drainage assessments became practically valueless and uncollectible. The bill further avers that the city had issued bonds in exchange for drainage warrants given for work, prior to the sale, under the authority of the act of the legislature of 1872, to an amount in excess of all the drainage assessments, which it will claim operated as a discharge of its liability as assessee of the streets, etc., and of all liability it may have incurred by any dereliction of duty in regard to the assessments against private property, but that this claim was not made known to Van Norden at the time of the purchase, and that he would not have parted with his property payable out of drainage assessments if he had known that such claim would be set up to defeat the payment of the price. The bill closes with a prayer for an accounting of the drainage fund, including the amounts due by the city, and the application thereof to the payment of the complainant's warrants, and those held by others similarly situated who may come in and avail themselves of the benefit of the bill.

To this bill the defendant filed a demurrer, both general and special, assigning for cause (1) want of jurisdiction in the circuit court; (2) want of equity in the bill; and (3) that the matters sought to be litigated had been decided adversely to the complainant's pretensions in the case of Peake v. City of New Orleans, 139 U.S 342, 11 Sup.Ct. 541. The demurrer was sustained and the bill dismissed by the circuit court, and the cause was removed here on the appeal of the complainant. This court, being in doubt as to the application in Peake v. City of New Orleans, supra, to the case made by the bill, certified the following questions to the supreme court for advice and instructions: 'First. Is the city of New Orleans, under the warranties, express and implied contained in the contract of sale of June 7, 1876, by which she acquired the property and franchise from Warner Van Norden, and under the averments of the bill, estopped from pleading against the complainant the issuance of bonds to retire $1,672,105.21 of drainage warrants issued prior to said sale, as a discharge of her obligation to account for drainage funds collected on private property, and as a discharge of her own liability to that fund as assessee of the streets and squares? Should the decision in the case of Peake v. City of New Orleans, 139 U.S. 342, 11 Sup.Ct. 541, be held to apply to the facts of this case, and operate to defeat the complainant's action? ' The court declined to answer the second question, on the ground that it practically submitted the whole case, but answering the first, after reciting the facts, said: 'And now the question is whether the city is not estopped to plead in defense of liability on these drainage warrants the fact of prior issue of bonds to a larger amount than that assessed against the areas of its streets and squares, and collected from private property. We think this question must be answered in the affirmative. The city, in respect to the purchase of this property from the canal company and its transferee, and in the obligations assumed by the warrants issued, acted voluntarily. It was not in reference to these matters, as it was to those considered in Peake v. City of New Orleans, 139 U.S. 342, 11 Sup.Ct. 541, a compulsory trustee, but a voluntary contractor; and the proposition which we affirm is that one who purchases property, contracting to pay for it out of a particular fund, and issues warrants therefor payable out of that fund,-- a fund yet partially to be created, and created by the performance by him of a statutory duty,-- cannot deliberately abandon that duty, take active steps to prevent the further creation of the fund, and then, there being nothing in the fund, plead in defense to a liability on the warrants drawn on that fund that it had, prior to the purchase, paid...