United States v. Fort Scott
ERROR to the Circuit Court of the United States for the District of Kansas.
A statute of Kansas, approved March 2, 1871, confers upon cities of the second class authority to enact ordinances for certain defined purposes. By the sixteenth section anthority is given: 1st, to levy and collect taxes for general revenue purposes, not to exceed five mills on the dollar in any one year, on all the real, mixed, and personal property within their limits, taxable according to the laws of the State; 2d, to open and improve streets, avenues, and alleys, make sidewalks, and build bridges, culverts, and sewers, the cost of which may be met by assessments in the following manner, to wit: first, for opening, widening, and grading all streets and avenues, for building bridges, culverts, and sewers, and for footwalks across streets, assessments shall be made on all taxable property within the corporate limits of the city, not exceeding five mills on the dollar in any one year; second, for making and repairing sidewalks, assessments shall be made on all lots and pieces of ground abutting on the improvement, according to front feet; third, for paving, macadamizing, curbing, and guttering streets, alleys, and avenues, and excavating, grading, and filling same, and for improvements of the squares and areas formed by the crossing of streets, assessments shall be made on all lots and pieces of ground to the centre of the block extending along the street or avenue, the distance improved or to be improved, according to the assessed value of the lots or pieces of ground, without regard to the buildings or improvements thereon, which value must be ascertained by three disinterested appraisers, appointed by the mayor and council.
By the seventeenth section it is declared that assessments made pursuant to the third clause of the second subdivision of the preceding section shall be known as 'special assessments for improvements,' and, except as thereinafter provided, shall be levied and collected as one tax, in addition to taxes for general revenue purposes. But the mayor and council are empowered to issue bonds of the city for the costs of paving, macadamizing, curbing, and guttering streets and avenues, and excavating, grading, and filling for same, to be made payable as follows: one-third of the aggregate amount of bonds of any issue in one year, one-third in two years, and one-third in three years, with interest from date, at the rate of ten per cent per annum, payable annually. 'And for the payment of said bonds, assessments shall be made in each year to pay the principal and interest maturing on said bonds during said fiscal year, upon the taxable property chargeable therewith, as is provided in the third clause of the second subdivision of the preceding section, and such tax shall be certified by the city clerk to the county clerk, and placed upon the tax-roll for collection, subject to the same penalties and collected in like manner as other taxes.' Laws of Kansas, 1871, p. 148.
The eighteenth section provides that 'the council may appropriate money and provide for the payment of the debts and expenses of the city, and, when necessary, may provide for issuing bonds for the purpose of funding any and all indebtedness now existing or hereafter created of the city, now due or to become due.' And for the payment of any coupons of bonds issued under that section the council is required to levy taxes, payable in cash, on all the property in the city, in addition to other taxes. Id.
The nineteenth section declares that the council may provide for making any and all improvements of a general nature in the city, and to pay for same may, from time to time, borrow money and issue bonds. In the payment of such bonds, with their interest coupons, at maturity, the council is required to levy taxes, payable in cash, on all taxable property within the city, in addition to other taxes. Bonds authorized by that section cannot, bowever, be issued unless the council is previously instructed to do so by a majority of all the votes cast at an election held for that purpose.
By sect. 21 the council is required 'to make provision from time to time for a sinking-fund to redeem at maturity the bonded indebtedness of the city,' the taxes levied for that purpose being payable only in cash.
By sect. 22 the council is authorized and required to levy annually taxes, payable in cash only, on all the taxable property within the city, in addition to other taxes, and in amount sufficient to pay the interest and coupons as they become due 'on all the bonds of the city' then (1871) issued or thereafter to be issued by the city.
These sections seem to be the only portions of the statute of March 2, 1871, which have any direct bearing upon the question presented for consideration.
In the year 1872, the city council of Fort Scott, being a city of the second class, by ordinance required one of its streets to be graded, paved, guttered, and macadamized, within prescribed limits, the cost of the work to be paid for in bonds of the city, to be registered and classified as special improvement bonds, and which might be made payable in New York. The ordinance provides that the bonds 'shall be paid, principal and interest, solely from special assessments to be made upon and collected solely from the lots and pieces of ground fronting upon and extending along the street the distance improved, in the manner provided in sects. 16 and 17 of an act of the legislature of Kansas relating to the powers and government of cities of the second class, approved March 2, 1871.'
In accordance with that ordinance, bonds with coupons attached were issued and negotiated to the amount of several thousand dollars.
Upon the margin of each bond is this statement: 'Issued in accordance with sects. 16 and 17 of an act of the legislature of Kansas, entitled an act relating to the powers and government of cities of the second class, and to repeal certain sections of chapter 19 of the general statutes of 1868, approved March 2, 1871, and in pursuance of an ordinance of the city of Fort Scott, entitled an ordinance ordering the grading, curbing, guttering, and macadamizing a part of Wall Street.' Upon each bond also was indorsed the official certificate of the auditor of the State, to the effect that such bond 'had been regularly and legally issued, that the signatures thereto were genuine,' and that the bond had been duly registered in his office in accordance with the statute of March 2, 1872.
The Concord Savings Bank having become the holder and owner, for a valuable consideration and before maturity of some of these bonds, and failing to obtain payment, sued the city, and recovered judgment for the amount thereof in the Circuit Court of the United States for the District of Kansas. The judgment is in the ordinary form, except that the court adds: 'And it is further ordered and adjudged that the judgment now here rendered be enforced and collected pursuant to law in such case made and provided.'
Subsequently the bank sued out an alternative writ of mandamus, commanding the city council to levy and collect a sufficient tax upon all the taxable property within the city to pay the judgment, interest, and costs. But, upon demurrer, the court below held that the relator was only entitled to a levy of special assessments upon the property benefited and improved, and upon that ground the writ was quashed and the relator's information dismissed. The relator then sued out this writ of error.
Mr. J. D. McCleverty for the defendant in error, in support of the judgment below.
The court, in rendering the original judgment against the city, annexed to it a special provision, which had been approved in County of Cass v. Jordan, 95 U.S. 373, and County of Cass v. Johnson, id. 360. The judgment, therefore, should not be construed to be an absolute one, rendering the city liable at all events to pay the same, and entitling the relator to the levy of a general tax, inasmuch as, by the provisions of the statute and the ordinance under which the bonds were issued, the means of paying them were to be derived exclusively from the taxable property chargeable therewith. The relator was fully cognizant of the fact when he purchased these bonds, as he had full notice by the recitals upon their face. While the city is bound by these recitals, he is equally so. He is therefore affected with notice of the ordinance, as it was necessary to authorize the issue of the bonds. The provision touching this special tax for the payment of them was a part of the contract, which cannot be modified or repealed, and it was that provision which the court obviously had in view in giving to the judgment its exceptional form.
The uniform ruling has been, that where a liability created by law is payable out of a special fund, that fund can alone be resorted to for payment. McCullough v. The Mayor, &c. of Brooklyn, 23 Wend. (N. Y.) 458; Lake v. Trustees of Williamsburgh, 4 Den. (N. Y.) 520; Hunt v. City of Utica, 18 N. Y. 442; Eilert v. The City of Oshkosh, 14 Wis. 586; Whalen v. La Crosse, 16 id. 271; Silkman v. Milwaukee, 31 id. 555; Finney v. Oshkosh, 18 id. 209.
In Michigan, it is the rule that the corporation is only liable for the special assessment. The People v. Township of Zilwaukie, 10 Mich. 274; Goodrich v. Detroit, 12 id. 279; Bank v. The City of Lansing, 25 id. 207. See also City of New Albany v. Sweeney, 13 Ind. 245; Casey v. Leavenworth, 17 Kan. 189.
Mr. James D. Campbell, contra.
MR. JUSTICE HARLAN, after stating the case, delivered the opinion of the court.