The Supreme Court of the United States dismissed a bill in equity of a creditor seeking for relief. It decided that the property held by the repealed corporation for public uses, such as public buildings, wharves, fire engines, and, generally, all property held for governmental purposes, could not be subjected to the payment of the debts of the city. It further decided that upon a repeal of its charter such property passed under the immediate control of the State, since the power delegated to the city in that respect had been withdrawn.' It also decided that the private property of individuals could not be subjected to the payment of the debts of the city, except through taxation, and that the power of taxation being legislative it could not be exercised otherwise than under the authority of the legislature. As to private property that is, such as was owned by the municipality, not for public or municipal uses it would of course be liable to the claims of creditors, but subject thereto, it would be under the control of the legislature.

§ 336 (170). Rights of Creditors on a Dissolution. The rights of creditors of municipal corporations are elsewhere more fully considered. The doctrines of the Supreme Court of the United States may be thus briefly summed up:

3

1. The rights of creditors, based upon the obligation of their contracts, are protected by the Constitution of the United States against subsequent legislation impairing the same.

2. It has often been decided, and is the settled doctrine of the Supreme Court, that the remedies subsisting in a State when and where the contract is made and is to be performed, are a part of its obligation, and that any subsequent law of the State which so affects those remedies as substantially to impair and lessen the value of the contract, is forbidden by the Constitution of the United States, and is therefore void.

1 Substantially the same principles as to the effect of the dissolution of a municipal corporation by a repeal of its charter upon its property rights, are laid down in the opinion of Mr. Justice Field in Broughton v. Pensacola, 93 U. S. 266, at pp. 268, 269; noted infra, § 336, note.

2 Meriwether v. Garrett, 102 U. S. 472. Precisely what the court means by the statement "that the power of taxation is legislative and cannot be exercised otherwise than under the authority of the legislature" remains

Applying this principle, it is

to be determined in that tribunal. It certainly meant in that case that the power could not be set in motion by a bill in equity. Whether it meant that the power of taxation as a means of paying the debts of the repealed corporation did not survive such repeal and the legislative prohibition of the exercise of such power, can only be known when this precise question arises for judgment.

3 Ante, chap. iv.; post, §§ 1511 et seq., 1520; infra, § 357.

held that if the municipality agrees, as a part of its contract, that the creditor shall have the right to a special tax, the statute giving this right cannot as to such creditor be repealed, unless there be substituted in its place a remedy legally equivalent in value and efficacy.1

3. The legislature in its sympathy with insolvent and repudiating municipalities has sometimes gone so far as absolutely to repeal their charters, and in some form to substitute or authorize new municipal organizations in their place. Instances of such legislation in respect of the cities of Memphis, of Brownsville, of Mobile, and of some other places, are given in the notes to this section. The State's plenary power over its municipal corporations to change their organization, to modify their method of internal government, or to abolish them altogether, is not restricted by contracts entered into by the municipality with its creditors or with private persons. An absolute repeal of a municipal charter is therefore effectual so far as it abolishes the old corporate organization; but where the same, or substantially the same, inhabitants are erected into a new corporation, whether with extended or restricted territorial limits, such new corporation is treated as in law the successor of the old, entitled to its property rights, and subject to its liabilities.

4. As to the mode of enforcing such liabilities difficult questions have arisen, some of which cannot at this time be said to be clearly settled. It may, however, we think, be considered as definitively determined by the Supreme Court, that the levy and collection of taxes cannot be enforced in or by the Circuit Courts exercising equity jurisdiction, but only by appropriate remedies in the court of law, chief among which is the remedy by mandamus.2

5. If the legislature repeals the charter of the debtor corporation and dissolves it, and makes no provision for its debts, and it has no private property subject to execution, and there is no resource for

1 Seibert v. Lewis, 122 U. S. 284, noted more fully post, § 1512, stands as the type of this class of cases, - that is, where the corporate existence of the indebted municipality is left untouched by the legislature, but the subsequent legislation impairs the creditor's remedy as it existed at the date of the contract. Many other cases to the same effect are cited in the notes to this section.

2 Thompson v. Allen County, 115 U. S. 550. Mr Justice Miller here

reviews the previous cases on the point, and reaffirms the want of any jurisdiction in equity to levy and collect taxes for the satisfaction of judgments against municipalities. The doctrine of want of jurisdiction in equity is maintained, although the remedy at law by mandamus has proved ineffectual, and no officers can be found to perform the duty of levying and collecting the taxes. See, further, cases cited in the note to this section; also post, chaps. xxix. and xxxi.

the payment of such indebtedness but taxation, then if no new or successor corporation be organized, and if no instrumentalities of the taxing power remain subject to the process of the courts, the rights of creditors are, in fact, impaired or destroyed, and it would seem that the courts are in such case practically powerless to prevent this result; and that the creditor's only remedy, which he would be very apt under the circumstances to consider illusory, is to appeal for relief to the legislative departments of the government, that is to say, to the very department that of set purpose adopted the hostile enactments that cut down and destroyed his rights and remedies.1

1 Heine v. Levee Commissioners, 19 State v. Trustees, 5 Ind. 77; Coulter Wall. (U. S.) 655; Rees v. Watertown, v. Robertson, 24 Miss. 278; Gelpcke v. 19 Wall. (U. S.) 107; Barkley v. Levee Dubuque, 1 Wall. (U. S.) 175; Von Commissioners, 93 U. S. 258; Meri- Hoffman v. Quincy, 4 Wall. (U. S.) wether v. Garrett, 102 U. S. 472; 535; Welch v. Ste. Genevieve, 1 DilThompson v. Allen County, 115 U. S. lon C. C. 130; Thomson v. Lee County, 550; Amy v. Watertown, 130 U. S. 301. 3 Wall. (U. S.) 327; Havemeyer v. Mr. Hare regards such legislation as Iowa County, 3 Wall. (U. S.), 294; a fraud upon the constitutional pro- Butz v. Muscatine, 8 Wall. (U. S.) 575; hibition against the legislative impair- Lansing v. Treasurer, &c., 1 Dillon C. C. ment of contract, and consequently 522; Soutter v. Madison, 15 Wis. 30; invalid. 1 Am. Const. Law, 640. But Smith v. Appleton, 19 Wis. 468; Blake the view that such legislation is invalid v. Portsmouth Railroad Co., 39 N. H. does not seem to be consistent with the 435; compare Richmond Gaslight Co. v. decisions of the Supreme Court on the Middletown, 59 N. Y. 228; post, § 1215; precise point. The exact limits, how- Wolff v. New Orleans, 103 U. S. 358; ever, of legislative power, in respect of Beatty v. People, 6 Colo. 538; Hare v. depriving the creditors, even by a Kennerly, 83 Ala. 608. general repeal of the charter and in connection therewith by prohibitions of the exercise of the taxing power in behalf of existing creditors, depriv ing them of the remedies in force when their contracts were entered into, or of others legally equivalent thereto, may, we think, be regarded as yet open on certain points to further discussion and more definite ascertainment.

On the general subject of the right of creditors of indebted and dissolved municipalities, see: Ante, chap. iv. passim; particularly, §§ 113, 114, 115; post, §§ 337, 357-360; Cooley, Const. Lim. 290, 292; Cooley, Taxation (2d ed.), 75; Curran v. Arkansas, 15 How. (U. S.) 312; Bacon v. Robertson, supra; 2 Kent, 307, note; Broughton v. Pensacola, 93 U. S. 266, observations of Field, J., p. 269; Milner's Admx. v. Pensacola, 2 Woods C. C. 632, 642; Laird v. City of De Soto, 22 Fed. Rep. 421; Ross v. Wimberly, 60 Miss. 345, Brewis v. Duluth, 13 Fed. Rep. 334; s. c. 9 Fed. Rep. 747; Garrett v. Memphis, 5 Fed. Rep. 860; Indianapolis v. Indianapolis Gas Co., 66 Ind. 396, approving text; County Com'rs v. Cox, 6 Ind. 403;

Memphis City Case. The city of Memphis, in Tennessee, having become insolvent and unable to meet its obligations, the legislature of that State in 1879 repealed all laws by which it had been incorporated, and passed a general act establishing what were termed "Taxing Districts" as a means of local government for the peace, safety, and general welfare" of "communities embraced in the territorial limits of all such municipal corporations" as had, or might have, their charters abolished or might surrender them under the act. In 1881 a similar act established "taxing districts of the second class" for communities having a population of less than 30,000. They were invested with practically all the powers usually conferred upon municipal corporations, except that of levying taxes, which was expressly reserved to the legislature, and that of issuing evidences of indebtedness. It was also expressly provided that the taxing districts, so created, should not pay, or be liable for, any debt created by the extinct corporations, and that no taxes collected under the act should ever be used to pay such

598

$337

The

§ 337 (171). Changes not amounting to name of an incorporated place may be changed, its boundaries ena Dissolution.

debts. (For a succinct statement of Mobile being largely in debt, the legisthe principal features of this legislation, lature passed an see Meriwether v. Garrett, 102 U. S. charter of the city and declaring that the 472, by Mr. Justice Field; ante, § 335.) corporation was thereby dissolved and act repealing the The organizations formed under these abolished. The act provided for the acts are uniformly held to be municipal appointment by the Governor of three corporations. State v. Taxing District commissioners to take possession of the of Shelby Co., 16 Lea (Tenn.), 240; property and assets of the city, except Lea v. State, 10 Lea (Tenn.), 478 property held for the public use and (districts of the second class); Luehr- governmental purposes, and apply the man v. Shelby Taxing District, 2 Lea same under the orders of the Court of (Tenn.), 425; O'Connor v. Memphis, Chancery to the payment of the debts 6 Lea (Tenn.), 730; (holding, also, that of the city, giving preference to the a suit against the old corporation may floating debt. On the same day the be revived against the taxing district). legislature incorporated the Port of They may be sued as any other mu- Mobile, which included all the thickly nicipality. Uhl v. Taxing District, 6 settled and closely built portion of the Lea (Tenn.), 610. As to who may vote former City of Mobile; and all of the on proposition to organize under the $16,000,000 of the taxable property of act, see Pepper v. Smith, 15 Lea (Tenn.), the city but $900,000 was included 551. The prohibitions against exercis- within the limits of the Port of Mobile. ing the taxing power held to be void so and fourteen-fifteenths of the inhabifar as they affect the taxing powers of tants of the City were inhabitants of the former corporations, which became the Port of Mobile. It limited the a part of the contracts entered into by powers of the Port of Mobile to the them. Devereaux v. City of Browns- levy of a tax of six-tenths of one per ville, 29 Fed. Rep. 742 (mandamus cent, and prohibited its authorities issued to the taxing district to enforce, from exercising any other powers. by taxation, the payment of judgments Two questions arose, namely: Whether against the old corporations). Com- a preceding creditor was entitled to a pare with Meriwether v. Garrett, Heine v. Levee Com'rs, and other like cases in the Supreme Court of the United States, as to the power to compel the levy of taxes, notwithstanding the repeal of the charter and the prohibition by the legislature to the new officers to levy and collect taxes for the payment of the debts of the dissolved municipality.

A new or amended charter for Memphis, passed March 27, 1907, was held to be unconstitutional, mainly because the title of said act purports to amend the former charter, the body of the act contains a new and not an amended charter, and is, therefore, void because in conflict with its title. Malone v. Williams, 118 Tenn. 390; 103 S. W. Rep. 798. Quare? Considering the legal effect of what was done in the body of the act, did not the title of the new act of March 27, 1907 (q. v.) fairly and truly disclose the purpose and effect of the new or amended charter? This decision leaves Memphis under the Taxing District Act of 1879 and its amendments.

Mobile City Case.

The City of

judgment against the Port of Mobile on the obligations of the City of Mobile: and second, whether the powers of taxation in existence at the date of the creation of the debt by the City of Mobile could be enforced in favor of the creditor. Both of these propositions were decided in favor of the creditor. The court stated the general proposition involved as follows:

of the statutes and facts, that the Port "We are of opinion, upon this state of Mobile is the legal successor of the City of Mobile, and liable for its debts. The two corporations were composed of substantially the same community, included within their limits substantially the same taxable property, and were organized for the same general purposes.

has given a local community, living Where the legislature of a State within designated boundaries, a municipal organization, and by a subsequent act, or series of acts, repeals its charter and dissolves the corporation, and incorporates substantially the same people as a municipal body under a new name for the same general purpose, and the great mass of the taxable prop

larged or diminished, and its mode of government altered, and yet the corporation not be dissolved, but in law remain the same.'

erty of the old corporation is included judgment recovered against its prewithin the limits of the new, and the decessor. See also Meyer v. Porter, 65 property of the old corporation used Cal. 67. for public purposes is transferred without consideration to the new corporation for the same public uses, the latter, notwithstanding a great reduction of its corporate limits, is the successor in law of the former, and liable for its debts; and if any part of the creditors of the old corporation are left without provision for the payment of their claims, they can enforce satisfaction out of the new."