The opinion of the Court was delivered by
Fenner, J.
The plaintiffs are individual taxpayers of the City of New Orleans.
The scope of the relief sought by them in this action embraces the following objects, viz :
1. To declare null and void the Ordinances of the City, Nos. 7531, [135]*1357532, 7535 and 7536, being respectively (No. 7531) tbe ordinance levying the fifteen mills tax for the alimony of the City and the premium bonds; (No. 7532) the ordinance levying 16f mills tax to pay judgments of United States Courts in obedience to writs of mandamus from said Courts; (No. 7535) the license ordinance, and (No. 7536) the ordinance making the estimate of liabilities and expenditures, all for the year 1832.
2. To enjoin and prohibit the enforcement of the tax ordinances, Nos. 7531. and 7532.
3. To enjoin the City from levying or collecting, on account of the premium bond tax, more than enough to pay the principal, interest and premiums on the drawn premium bonds of those actually outstanding, ($8,595,520,) and from levying any tax to pay'any principal, interest or premiums on account of such bonds which have not been issued by the City, or, which, after issuance, have been bought, paid or otherwise extinguished.
4. To enjoin the City from levying or collecting any tax exceeding ten mills on the dollar, and to decree that the City has no claim or privilege on the property of petitioners for any tax beyond ten mills on the dollar.
. The grounds upon which this sweeping- relief is asked are numerous. Many of them are too frivolous to require notice, and others may be summarily disposed of.
First. So far as the tax levied under mandamus of the United States Courts, to pay judgments, is concerned, the objections thereto may be dismissed with the statement that courts of the State have no power to interfere with the Federal tribunals in the exercise of the power of enforcing their own judgments.
Second. The objections to the budget are conclusively rebutted by the answer of the City and the record, showing that Act 38 of 1879 was substantially complied with.
Third. The charge that the tax was illegally levied on movable property, under an assessment made thereof in 1881, instead of in 1882, in which the tax was collectible, in violation of the requirement of Articles 211 and 218 of the Constitution, need not be considered here, because, if true, it would not sustain the relief now asked. Plaintiffs may find ample remedy in opposing- this defense to the collection of any such tax on movable property belonging to them. We say this without even suggesting an opinion as to the validity of such defense.
Fourth. The claim, that under the Constitution no tax exceeding ten mills on the dollar can be collected, has been fully disposed of in the Moore, the Saloy, the DeLeon, the Ranger, and other cases.
We now approach the serious issues in the case, which are:
[136]*1361. Whether, under existing circumstances, the premium bond tax can be lawfully levied and collected.
2. Whether the whole of that tax can be levied, or only such proportion thereof as the outstanding premium bonds bear to the whole twenty millions, the issuance of which, it is claimed, was contemplated when the tax was provided.
These questions were argued with great zeal and apparent confidence by the counsel of the plaintiffs, and we shall now proceed to dispose of the same. As their claims are based upon the terms of the premium bond Act, we shall begin by stating and analyzing its provisions.
The Act No. 31 of 1876, commonly called the premium bond Act, was an appeal by the State, in behalf of a desperate, overtaxed and bankrupt City, to the generosity, the interest and the fears of its creditors.
The Act, in its preamble, recited that the total debt, bonded aud floating, of the City, exceeded $23,000,000; that its taxable property had become so reduced in value as to require taxation of at least live per cent, per annum to meet the payments according to the terms of, the Acts creating the debt; that so exorbitant a tax was impossible of collection, and would lead to a further shrinkage in assessable values, inevitably eventuating in practical bankruptcy ; and that the premium bond plan, which had already been adopted by tbe City Council, offered an avenue of escape from impending evils. ’
The Act then proceeded to make the following provisions: It approved and ratified the ordinances of the Council adopting the plan; it authorized and directed the City to exchange premium bonds for all outstanding valid bonds; it appointed a permanent syndicate of citizens to supervise and control the execution of the plan; it nfade it the duty of the City Council, in the annual budget adopted for each ensuing year, to include a sum sufficient to pay the drawu bonds aud pi’eininms under the plan; it imposed on the Council the farther duty annually to levy a tax at a rate sufficient to provide the amount included in the budget as aforesaid, which tax after the year 1881 was to be at least one-half of one per cent.; it provided that the tax so levied should constitute a special fund to he used for no other purpose than the car-lying out of the plan, and that the funds arising therefrom should be placed to the credit of a premium bond account, to be paid only ou the authority of the commissioners of the consolidated debt, aud that the tax should he denominated as the premium bond tax and should be separately mentioned in the tax rolls and receipts; it provided that any surplus arising above the requirements of the plan, and all drawn series and premiums falling to the City should he used in the retirement of outstanding bonds not funded into premiums. The Act [137]*137further declared that no tax for the payment of any bonds or interest thereon', other than premium bonds, should be thereafter levied by the City of New Orleans, repealed all laws authorizing such taxation, and forbade all courts to mandamus the City to levy or collect any interest tax other than that provided by the Act. It declared that the taxing power of the City for all purposes, including the premium bond tax, should be limited to’one and One-half per centum per annum; and it declared that this limitation of the taxing power was “ a'cob tract, not only with the holder of premium bonds', büt álso with the taxpayers, so as to authorize any such holder or taxpayer to object to any rate of taxation in excess of the rate herein limited.” In a different section it Was further provided, that “ this Act in all its provisions and limitations be held a contract between the City of New Orleans, the holders of premium bonds and the taxpayers, so as to authorize any of the contracting parties to resist any increase of taxation' above the rate limited therein.” ■ ■
The Act contained other provisions not germane to our present purpose. ‘ ' 1
It is to be borne in mind- that this Act was passed soon after the initiation of the scheme and before any considerable exchange of bonds had been effected. It was a legislative contract proposed by the State to all holders of City bonds, with the obvious purpose of inducing its acceptance by promising every advantage to those who would accept and withholding every one from thóse'who refused.
The meaning of the Act is too clear to escape ’the perception of any. The State said to the holders of bonds:
Free access — add to your briefcase to read the full text and ask questions with AI
The opinion of the Court was delivered by
Fenner, J.
The plaintiffs are individual taxpayers of the City of New Orleans.
The scope of the relief sought by them in this action embraces the following objects, viz :
1. To declare null and void the Ordinances of the City, Nos. 7531, [135]*1357532, 7535 and 7536, being respectively (No. 7531) tbe ordinance levying the fifteen mills tax for the alimony of the City and the premium bonds; (No. 7532) the ordinance levying 16f mills tax to pay judgments of United States Courts in obedience to writs of mandamus from said Courts; (No. 7535) the license ordinance, and (No. 7536) the ordinance making the estimate of liabilities and expenditures, all for the year 1832.
2. To enjoin and prohibit the enforcement of the tax ordinances, Nos. 7531. and 7532.
3. To enjoin the City from levying or collecting, on account of the premium bond tax, more than enough to pay the principal, interest and premiums on the drawn premium bonds of those actually outstanding, ($8,595,520,) and from levying any tax to pay'any principal, interest or premiums on account of such bonds which have not been issued by the City, or, which, after issuance, have been bought, paid or otherwise extinguished.
4. To enjoin the City from levying or collecting any tax exceeding ten mills on the dollar, and to decree that the City has no claim or privilege on the property of petitioners for any tax beyond ten mills on the dollar.
. The grounds upon which this sweeping- relief is asked are numerous. Many of them are too frivolous to require notice, and others may be summarily disposed of.
First. So far as the tax levied under mandamus of the United States Courts, to pay judgments, is concerned, the objections thereto may be dismissed with the statement that courts of the State have no power to interfere with the Federal tribunals in the exercise of the power of enforcing their own judgments.
Second. The objections to the budget are conclusively rebutted by the answer of the City and the record, showing that Act 38 of 1879 was substantially complied with.
Third. The charge that the tax was illegally levied on movable property, under an assessment made thereof in 1881, instead of in 1882, in which the tax was collectible, in violation of the requirement of Articles 211 and 218 of the Constitution, need not be considered here, because, if true, it would not sustain the relief now asked. Plaintiffs may find ample remedy in opposing- this defense to the collection of any such tax on movable property belonging to them. We say this without even suggesting an opinion as to the validity of such defense.
Fourth. The claim, that under the Constitution no tax exceeding ten mills on the dollar can be collected, has been fully disposed of in the Moore, the Saloy, the DeLeon, the Ranger, and other cases.
We now approach the serious issues in the case, which are:
[136]*1361. Whether, under existing circumstances, the premium bond tax can be lawfully levied and collected.
2. Whether the whole of that tax can be levied, or only such proportion thereof as the outstanding premium bonds bear to the whole twenty millions, the issuance of which, it is claimed, was contemplated when the tax was provided.
These questions were argued with great zeal and apparent confidence by the counsel of the plaintiffs, and we shall now proceed to dispose of the same. As their claims are based upon the terms of the premium bond Act, we shall begin by stating and analyzing its provisions.
The Act No. 31 of 1876, commonly called the premium bond Act, was an appeal by the State, in behalf of a desperate, overtaxed and bankrupt City, to the generosity, the interest and the fears of its creditors.
The Act, in its preamble, recited that the total debt, bonded aud floating, of the City, exceeded $23,000,000; that its taxable property had become so reduced in value as to require taxation of at least live per cent, per annum to meet the payments according to the terms of, the Acts creating the debt; that so exorbitant a tax was impossible of collection, and would lead to a further shrinkage in assessable values, inevitably eventuating in practical bankruptcy ; and that the premium bond plan, which had already been adopted by tbe City Council, offered an avenue of escape from impending evils. ’
The Act then proceeded to make the following provisions: It approved and ratified the ordinances of the Council adopting the plan; it authorized and directed the City to exchange premium bonds for all outstanding valid bonds; it appointed a permanent syndicate of citizens to supervise and control the execution of the plan; it nfade it the duty of the City Council, in the annual budget adopted for each ensuing year, to include a sum sufficient to pay the drawu bonds aud pi’eininms under the plan; it imposed on the Council the farther duty annually to levy a tax at a rate sufficient to provide the amount included in the budget as aforesaid, which tax after the year 1881 was to be at least one-half of one per cent.; it provided that the tax so levied should constitute a special fund to he used for no other purpose than the car-lying out of the plan, and that the funds arising therefrom should be placed to the credit of a premium bond account, to be paid only ou the authority of the commissioners of the consolidated debt, aud that the tax should he denominated as the premium bond tax and should be separately mentioned in the tax rolls and receipts; it provided that any surplus arising above the requirements of the plan, and all drawn series and premiums falling to the City should he used in the retirement of outstanding bonds not funded into premiums. The Act [137]*137further declared that no tax for the payment of any bonds or interest thereon', other than premium bonds, should be thereafter levied by the City of New Orleans, repealed all laws authorizing such taxation, and forbade all courts to mandamus the City to levy or collect any interest tax other than that provided by the Act. It declared that the taxing power of the City for all purposes, including the premium bond tax, should be limited to’one and One-half per centum per annum; and it declared that this limitation of the taxing power was “ a'cob tract, not only with the holder of premium bonds', büt álso with the taxpayers, so as to authorize any such holder or taxpayer to object to any rate of taxation in excess of the rate herein limited.” In a different section it Was further provided, that “ this Act in all its provisions and limitations be held a contract between the City of New Orleans, the holders of premium bonds and the taxpayers, so as to authorize any of the contracting parties to resist any increase of taxation' above the rate limited therein.” ■ ■
The Act contained other provisions not germane to our present purpose. ‘ ' 1
It is to be borne in mind- that this Act was passed soon after the initiation of the scheme and before any considerable exchange of bonds had been effected. It was a legislative contract proposed by the State to all holders of City bonds, with the obvious purpose of inducing its acceptance by promising every advantage to those who would accept and withholding every one from thóse'who refused.
The meaning of the Act is too clear to escape ’the perception of any. The State said to the holders of bonds:
“ If you will exchange your bonds for premium bonds, I will impose upon the City the absolute duty of levying an annual tax of at least five mills (after 1881) to be devoted exclusively, as far as necessary, to the payment of premium bonds, in accordance with the plan; I will forbid any taxation beyond this five mills and ten mills additional for all other purposesj I will forbid the levying of any tax whatever for the payment of interest on bonds other than premium bonds; I will leave the holders of bonds who refuse my proposition no resource for payment except from the surplus of the five mills tax not required for the execution of the premium bond plan, and from the drawn series of premium bonds, and prizes which may fall to the City; and I will declare all these provisions to constitute a contract, só as to authorize the holder of premium bonds, the City, or any taxpayer to object to and resist the levying or collection of any tax other than the tax authorized by the Act.”
The Act is susceptible of no other possible interpretation. It first [138]*138provided absolutely and without qualification that the premium, bond tax of at least five mills, after 1881, should, under,all circumstances, be, annually .levied, collected, kept apart, and devoted to the purposes prescribed pit then said that the taxing power-of the City, including the premium bond tax, should be limited to fifteen mills, which was equivalent to saying that beyond the premium bond tax-theCity might levy ten mills for all purposes and no more. When it authorized the premium . .bondholder and the taxpayer to, object to .and resist any taxation ,.M in excess of the rate herein limited,” it meant any taxation additional to or other than the tax for .premium bonds, and for other, purposes,authorized by and limited in the Act.
The pretense that the Act intended to authorize these parties to resist the levying of the premium bond tax, which, it has solemnly agreed and positively required should be levied annually, would seem to be too self-contradictory for serious consideration.
It is said that this Act is a reciprocal, synallagmatic contract. Such it clearly is. This means it is a contract in which, under the definition of the Code, “ the parties expressly enter into mutual engagements,” (C. C. 1765) that is to say, one party “ engages to do or not to. do ” certain things, and in consideration thereof the other party “ engages to do or not to do” certain other things. .
It becomes important, therefore, to ascertain not only what are the Several engagements of such a contract, but also which party bound, himself.to perform the respective engagements..
, Now, which-party to this coutract engaged that the premium bond tax should be annually levied ? Which party engaged, that no tax in excess of this premium bond tax and ten mills additional should be levied? Which party engaged that no tax for tlie payment of bonds or interest on bonds other than premiums should be levied? Manifestly, these were all'engagements exclusively undertaken by the State, acting for her creature, the City of New Orleans. This is apparent from the nature, of the engagements, because nobody hut the State or City can. levy taxes.or limit taxation, or refuse to levy, taxes.. But it is equally clear, froni the language of the Act, which in the very clauses defining, these engagements as .a contract, adds the words: “so as to authorize the prerniurq .bondholder or any taxpayer.to legally object to any rate, of taxation,, in excess.of the rate herein stipulated,” in other words, to resist any, breach by tbe State or City of their engagements.
.On tbe, ot]ier. band, the engagements of the bondholder, when he aceeded to,the contract, were: •
I. To exchange his bonds for premium bonds, thereby, abandoning, all his rights, .and remedies, on his original,bonds .and,, substituting [139]*139tlierefor5 the rights and remedies prescribed in the Act for his new bonds.
2. That he would never exact for the satisfaction of Ms bonds any ■tax beyond that stipulated in the Act.
So far as the taxpayer is concerned, his nomination as a party to the "contract means nothing. • No provision is made for requiring or obtaining his consent, without which he could not be made a party.- He is bound thereby just' so far as the State, in th'e exercise of the law-liia&ing power, was competent to bind him and no further, ánd to that ektent be would have been bound, had no mention been made of him, to precisely the same extent and with the same force as'■ under the provisions referred to. ' ' ■ •
- In the Saloy case, these same taxpayers, or some of them, were before us resisting the enforcement of the premium bond- tax, at a time when there was no taxation beyond the limit fixed in the Act. Would it have been an answer to their suit to say that "they were parties to the contract and estopped from raising the defenses which we there considered and disposed of ? ■ ■ 1
He is no party to the. contract. He is simply subject to and entitled to all the benefit of the law. So long as this legislative contract remains law, and to the extent that it is law, he has the right to prevent the violation thereof by anybody to the injury of his rights.
The taxpayers in this case are contesting a tax levied by the City. Obviously the question is, had the City the power to' levy the tax ? If it had, the tax must be sustained, otherwise it must be annulled.
The questions as to the Constitutionality of Act 31 of 1876,' and as to the validity of the contract sanctioned thereby, in so far as the provisions for the premium bond tax and plan áre concerned, as well as the question of the duty of the City to’comply with those provisions, have been finally passed upon by this Court, and we do not understand that the counsel for plaintiffs seek to agitate or reopen these issues.
Their position now is, that conceding the validity of the contract and the duty of the City to comply therewith, yet, that under the terms of the contract itself, the City is relieved from the duty of levying the premium bond tax in year 1881, for the reason that the -City had been compelled by mandamus of United States Courts to levy, in that year, taxes for other purposes in excess of the limit of taxation established by that contract. The conclusive answer to this Contention flows directly from the analysis we have already made of that contract and of the mutual engagements assumed by the several parties thereto’»
We there showed that the obligation to limit taxation was one‘of several engagements undertaken by the State and City alone, in con[140]*140■sideration of other and different engagements undertaken by the assenting bondholders.
It is not pretended that the premium bondholders have violated any of the engagements which, under our construction of the contract, were undertaken by them. Nor is there any charge that they have, in any manner, provoked or contributed to the excessive taxation complained of.
The naked question remains, whether a party to a synallagmatic contract, who has undertaken therein to perform several engagements, can, by violating, from whatever cause, one of them, escape the obligation of performing the others in favor of his co-contractor who has performed all of his reciprocal engagements.
- Suc.h a question can find but one answer, and that an emphatic .negative.
. Another, conclusive ground of denying this claim of plaintiff would ■result from the impossibility of assuming that this Act, which positively required that the premium bond tax should be levied, and that, including the same, no tax exceeding fifteen mills should be levied, and authorizing the parties ■ to resist any taxation in excess thereof, could possibly be construed as authorizing resistance, under any circumstances, to the premium bond tax, the levying of which it had just expressly required in the most positive terms, and which was the very gist and marrow of the entire proposition embodied in the Act and submitted to the creditors.
The taxpayers of the City of New Orleans have derived in the past, ■and will continue to derive immense advantages from this Act. Under its provisions, bonds of the City to the extent of more than thirteen millions of dollars were funded into premium bonds. The annual.interest on the bonds so funded would have amounted to nearly a million of dollars annually, the payment of which would have required an annual tax nearly double that which is levied under the premium bond plan. Even of the diminished tax so levied, more than three-fifths is returned directly to the City, to be used under the provisions of the Act, for the reduction of her bonded debt.
Such is a portion of the valuable consideration which moved from these funding bondholders to the City and the taxpayers, under this contract.
The only counter consideration which the bondholders received was the levying and appropriation of the tax provided by the Act, of which it is the object of the present suit to deprive them.
The adoption of the construction of this contract, insisted on by •plaintiffs, would be to convict the State of having.laid a cunning, de[141]*141eeitful and dishonorable trap in which to catch and despoil confiding creditors.
The State submitted a proposition of settlement to the City’s creditors, in which it plainly said : those of you who accept shall have a tax : those of you who refuse shall have none.” Some of the creditors ■accepted; others refused. Now, we are told that the meaning and effect of the contract is, that those who refused shall have a tax, and those who accepted shall have none. •
No court could countenance such an interpretation.
■II.
It is next contended by plaintiff that the five mills- tax provided in the contract was based on the assumption that the entire twenty millions of outstanding bonds should be funded into premiums, and that, as only a portion of the same were so funded, and as the City is compelled to provide otherwise for the refunded bonds, therefore the five mills should be reduced in the proportion which the premium bonds 'actually outstanding bear to the contemplated twenty millions. •
To this there are several answers, viz :
■ 1. The Act itself fully contemplated the contingency that all the bonds would not be funded, and that the series of premium bonds not issued would be held and drawn for by the City, and provided that any surplus of the premium bond tax not required to carry out the plan, and also, all series and premiums drawn by the City, should be used in retiring unfunded bonds in the manner provided in the Act. There was no provision that the failure to secure the'exchange of any portion of outstanding bonds should interfere with the amount of the tax or with the execution of the plan; and we find no judicial authority to supply such a provision.
2. It would be impossible to order a reduction of the tax without requiring, at the same time, a change of the entire premium bond' scheme. : That scheme contemplates aiid authorizes no other drawing except, on the original basis of the series of twenty millions of bonds; and the tax is designed to provide for the payment of the fixed number of series and premiums drawn. Now, although' duly about eight millions of the bonds are held by others than the City itself, yet, since the drawing Is determined by chance, it might well be that the large majority of drawn series and premiums might fall to the holders of these $8,000,000 of bonds. In such event, if the tax had been reduced, as claimed, whence would they find their payment 9
' Whether the legislative power might modify the entire plan by reducing, simultaneously and in exact, equal proportion, the number of Series to be drawn from, the number of series to be drawn and the [142]*142amount of prizes, and the amount of tax, .might present a question worthy of consideration; but clearly, the reduction of the tax, without corresponding modification of dtlier features of the plan, would operate a radical invasion and diminution of the bondholders’ rights.
The holders of premium bonds actually outstanding have no greater advantages than they would have-if every dollar of the twenty million's had been issued and remained outstanding.' The City herself receives whatever portion of the tax would' have gone to the holders of thé bonds, now in bet'hands, if they had "been'issued.
Under the law, as it exists, the .City is required to invest tho part coming to her-in,retiring unfunded bonds; If it be desired that such portion should he applied to the- payment of interest ou bonds other than premiums, and thus reducing the tax necessary to pay such interest, application should he made to the legislature—certainly, not .to the judiciary. . ¡
It has been suggested, that because the portion of the proceeds of the premium bond tax which fell directly to the City in. past years lias been illegally diverted from the. purposes prescribed by the law, and devoted to the. retirement of premium bonds instead of other unfunded bonds, therefore the holders of premium bonds should he required-to permit the whole proceeds of. the tax in 1881 and subsequent years, to go to the unfunded bonds until this illegal diversion has been compensated and made good. The suggestion might have some force if the holders of premium bonds were a joint stock company jointly interested in all the bonds. But .when it is considered that the holders of the present outstanding bonds were in no way parties to this illegal diveiv sion, had no interest in the bonds, which have, been thus retired, and have derived no advantage of any kind from.the diversion, the injustice of the suggestion is at once apparent. .
The Constitution of the United States extends the protection of its sheltering arms over all the valid contract creditors of the City of New Orleans. ...
We have swept out of. the Act 31 of 1876, every provision which impaired the contracts of those bondholders who did not accept tho proffered exchange.
We have adjudged its validity, in all other respects, as a contract between the State and City and the premium bondholders. We have heretofore enforced the right of the latter to the tax provided in tho contract.
. We find no consideration of law or justice favoring the adoption of a strained and unreasonable construction of this contract, which, while maintaining its validity and leaving the City in possession of all the enormous advantages received therefrom, would deprive the premium [143]*143bondholders of every benefit solemnly promised in the Act and forming, the .sole inducement and consideration for their acceptance.
. The judgment appealed from is, therefore, affirmed at appellants’ cost.