Von Hoffman v. City of Quincy
THIS case was brought up by a writ of error to the Circuit Court of the United States for the Southern District of Illinois.
The relator filed his petition in that court, alleging, among other things, as follows:
At the June Term, 1863, and before that time, he was the owner and holder of certain coupons on interest notes of the City of Quincy. They were past due and unpaid. When issued and negotiated they were attached to certain bonds made and delivered by that city, in payment for the stock of the Northern Cross Railroad Company, and of the Quincy and Toledo Railroad Company, subscribed for by the city under and by virtue of certain acts of the legislature of Illinois, of the 17th of October, 1851, and 26th of January, 1853, and the 31st of January, 1857. By the provisions of these several acts the city was authorized to collect a special annual tax upon the property, real and personal, therein, sufficient to pay the annual interest upon any bonds thereafter issued by the city for railroad purposes, pursuant to law. It was required that the tax, when collected, should be set aside, and held separate from the other portions of the city revenue, as a fund specially pledged for the payment of the annual interest upon the bonds aforesaid. It was to be applied to this purpose, from time to time, as the interest should become due, 'and to no other purpose whatsoever.'
The city failed to pay the coupons held by the relator for a long time after they became due, and refused to levy the tax necessary for that purpose. The relator sued the city upon them in the court below, and at the June Term, 1863, recovered a judgment for $22,206.69 and costs. An execution was issued and returned unsatisfied. The judgment was unpaid. The city still neglected and refused to levy the requisite tax. He therefore prayed that a writ of mandamus be issued, commanding the city and its proper officers to pay over to him any money in their hands otherwise unappropriated, not exceeding the amount of the judgment, interest, and costs; and, for want of such funds, commanding them to levy the special tax as required by the acts of the legislature before referred to, sufficient to satisfy the judgment, interest, and costs, and to pay over to him the proceeds.
The city filed an answer. It alleged that there was no money in its treasury wherewith to satisfy the judgment, and as a reason why a peremptory writ of mandamus should not issue, referred to an act of the legislature of Illinois, of the 14th of February, 1863, which contains the following provisions:
Sec. 4. The city council of said city shall have power to levy and collect annually taxes on real and personal property within the limits of said city, as follows: On real and personal property within, or which may hereafter be within, portions of said city lighted with gas, to meet the expenses thereof, not exceeding twenty-eight cents on each one hundred dollars per annum on the annual assessed value thereof. On all real and personal property within the limits of said city, to meet the expenses of obtaining school grounds, and erecting, repairing, and improving school buildings and school grounds, and providing teachers and maintaining public schools in said city, and to be devoted exclusively for such purposes, not exceeding twenty-five cents on each one hundred dollars per annum on the annual assessed value thereof: Provided, That no more than eighteen cents on each one hundred dollars aforesaid shall be levied in any year for such purposes without the concurrence of a majority of the votes of legal voters of said city, to be cast at an election to be ordered by said city council, and held to determine the rate per cent. so to be levied. On all real and personal property within the limits of said city, to pay the debts and meet the general expenses of said city, not exceeding fifty cents on each one hundred dollars per annum on the annual assessed value thereof.
Sec. 5. All laws and parts of laws, other than the provisions hereof, touching the levy or collection of taxes on property within said city, except those regulating such collection, and all laws conflicting herewith, are hereby repealed; but this act shall not affect taxes of said city relating to streets or alleys, or to licenses of whatever nature, nor any sources of revenue other than taxes upon real or personal property, and which said act remains in full force and unrepealed.
The answer averred that the full amount of the tax authorized by this act had been assessed, and was in the process of collection; that the power of the city in this respect has been exhausted: 'and that the said fifty cents on the one hundred dollars, when collected, will not be sufficient to pay the current expenses of the city for the year 1864, and the debts of the said city.' It further alleged that about the year 1851, the city, under the act of November 6th, 1849, issued to the Northern Cross Railroad Company bonds to the amount of $100,000, and about the year 1854, under the act of January 26th, 1853, other bonds to the amount of $100,000, and that about the year 1856, it made and delivered its other bonds to the amount of $100,000. It alleged that the bonds last issued were wholly unauthorized, but that they were subsequently ratified by the legislature by the act of January 1st, 1857. The relator's judgment, it averred, was founded upon coupons belonging to bonds of these three classes.
The relator demurred to the answer, and judgment was given against him.
The principal question in this court was whether the act of February 14th, impaired the obligation of a contract, and was therefore void within the tenth section of the first article of the Constitution, which prohibits any State from passing such an act.
A second question was whether, if it did so, a mandamus would lie against the city to compel it to levy a tax to pay the debt.
Messrs. McKinnon and Merrick, for the relator, plaintiff in error.
I. The general law of November 6th, 1849, and the several supplemental acts of the legislature, under which were issued the coupons, or interest notes, on which the relator obtained judgment, constitute a contract.
'A contract,' says Chief Justice Marshall,  'is a compact between two or more persons, and is either executory or executed. An executory contract is one in which a party binds himself to do or not to do a particular thing. A contract executed is one in which the object of the contract is performed, and this, says Blackstone, differs in nothing from a grant. A contract executed, as well as one that is executory, contains obligations binding on the parties. A grant, in its own nature, amounts to an extinguishment of the right of the grantor, and implies a contract not to reassert that right.'
This language was used in reference to a grant of land, by the governor of a State, under a legislative act. It is simple and unambiguous, and determines, in an unequivocal manner, that the grant of a State is a contract within the clause of the Constitution referred to, and implies an agreement not to resume rights granted. The doctrine applies to an act of the legislature granting authority to a city to issue its bonds in consideration of railroad stock, for its private advantage and emolument, and provide for the payment thereof by special taxation.
These acts of the legislature are grants of special powers and privileges to the respondent, for its private advantage and benefit, and not for municipal purposes, and when acted upon, and bonds are issued and negotiated thereunder, the acts fall completely within Judge Marshall's definition of executed contracts.
Do the acts possess, in any less degree, the elements of a good contract than a charter granted by the supreme power of a State, to any given number of persons, or corporators, for religious or educational purposes? They do not; and no one, at this day, would contend that such a charter is not a contract within the meaning of the constitutional provision invoked.
In Dartmouth College v. Woodward,  which was an action of trover that grew out of an attempt on the part of the legislature of New Hampshire, as revolutionary successor of George III, to revoke a charter of this kind, Judge Marshall, in delivering the opinion of the court, and speaking of the charter, holds the following language:
'This is plainly a contract to which the donors, the trustees, and the crown-to whose right and obligations New Hampshire succeeds-were the original parties. It is a contract made on a valuable consideration. It is a contract for the security and disposition of property. It is a contract on the faith of which real and personal estate has been conveyed to the corporation. It is, then, a contract within the letter of the Constitution, and within its spirit also.'The language of this case is applicable to the case at bar. Here we have a grant of special powers by legislative enactment, authorizing the respondent, as a private company, to purchase or subscribe for stock in certain railroad companies, and in payment therefor to issue its bonds, and provide for the annual interest on and the ultimate redemption of the bonds so issued, by the levy and collection of a special tax, to be set aside and held separate and distinct, for that and no other purpose whatever. Under these powers and privileges, stock is subscribed for, bonds issued and negotiated, pecuniary rights vested, and third parties, relying upon this legislative grant, pay out their money, and bon a fide become the owners of the bonds and coupons so issued.
But, probably, the most accurate definition of a contract by legislative grant, anywhere to be met with, is that laid down by Mr. Justice Washington, in this same case.
^1 Fletcher v. Peck, 6 Cranch, 137.
^2 4 Wheaton, 643.