Cherey v. City of Long Beach

The Common Council of the city of Long Beach has adopted an ordinance which provides that bonds of the city in the aggregate principal amount of $373,000 shall be issued for the purpose of funding certain unpaid judgments enumerated in the ordinance. These bonds are to be designated as “ Judgment Funding Bonds.” They are to be dated January 1, 1940. “ They shall,” in accordance with the terms of the ordinance, bear interest at a rate not exceeding four per centum (4%) per annum, payable semi-annually on each January 1st and July 1st, and shall matine $264,000 of Bonds on January 1, 1941, and $109,000 of Bonds on January 1, 1942.”

Article VIII of the Constitution, entitled “ Local Finances,” regulates the manner in which local subdivisions of the State may contract indebtedness, pledge their credit, and issue bonds or other obligations. Section 2 of that article is entitled “ Restrictions on indebtedness of local subdivisions; contracting and payment of local indebtedness; exceptions.” It provides, among other things: “ No indebtedness shall be contracted for longer than the period of probable usefulness of the object or purpose for which such indebtedness is to be contracted, to be determined by or pursuant t'a general or special laws, which determination shall be conclusive, and in no event for longer than forty years.” The parties, in order to define the controversy submitted to the court, have stipulated that “ plaintiff asserts that in issuing said bonds said City will contract indebtedness for longer than the period of probable usefulness of the object or purpose for which such indebtedness is to be contracted, in contravention of Section 2 of Article

Experience has demonstrated that in public, as in private, business current expenses should ordinarily be paid from current income; and that when indebtedness is contracted to meet extraordinary expenditures or expenditures not expected to recur, the indebtedness should be paid within the period in which the benefit expected to result from such expenditures is enjoyed. Where public officers charged with the duty to maintain government and to provide the money required to meet its expense have unrestricted power to borrow money, there is danger that such power may be used to postpone payment of current expenses and to place upon later generations the burden of paying for benefits long after the benefits have ceased. Extravagance, waste and, eventually, impairment or destruction of the public credit may result.

The Constitutional Convention of 1938 heeded such danger and formulated amendments to the Constitution calculated to afford adequate protection. In the Constitution as it existed at that time, there was provision that, with certain exceptions not material here, no debt should be contracted by or in behalf of the State “for a period longer than that of the probable life of the work or object for which the debt is to be contracted, to be determined by general laws, which determination shall be conclusive.” (Art. VII, § 4.) With but one change, the Constitutional Convention of 1938 incorporated in section 12 of article VÍI of the proposed amended Constitution, a similar restriction upon the power of the State to contract debts; in the amended Constitution the reference is to the “ probable life of the work or purpose,” instead of the “ probable life of the work or object,” for which the debt is contracted. At the same time, the Constitutional Convention incorporated in section 2 of article VIII of the proposed amended Constitution the provision, applying to debts of local subdivisions, which is relied upon , by the plaintiff herein. There, it must be noted, the

The difference in language is significant and its purpose has been made patent in the proceedings of the Constitutional Convention. Argument might be made that the words “ probable life of the work or object,” originally used in the restriction imposed by the Constitution upon the debt-contracting power of the State, can be applied reasonably only where a debt is contracted for a physical capital improvement and that no debt contracted for any other purpose may be made payable at a later date. Indeed, when the Legislature, in obedience to the mandate of the original provision of the Constitution, passed a general law determining the “ probable life of certain works or objects of state debt,” it made no determination of the probable life of any “ work or object ” other than physical capital improvements. (Cf. § 51 [now § 49-b] of the State Finance Law [Cons. Laws, ch. 56] [Laws of 1924, ch. 23].) In 1932, however, the Legislature enacted a new section, 49-c, of the State Finance Law, “ in further compliance with the requirements of section four of article seven of the state constitution,” and provided therein that “ the probable life of a public activity for relieving the people of the state from hardship and suffering caused by unemployment is hereby measured by the probable duration of its public welfare effect and is hereby determined to be twenty years.” (Laws of 1932, ch. 564.) We need not pause here to consider whether the original failure to determine the probable-life of any “ work or object ” not connected with a physical improvement, constituted a legislative construction that only works or objects which involve such an improvement have a “ probable life ” which can be determined by the Legislature, or whether the belated legislative determination that the “ probable life ” of a relief activity is twenty years, transcended the scope of the discretionary power vested under the Constitution in the Legislature. That belated determination was never challenged but when the Committee

The words “ period of probable usefulness of the object or purpose,” for which a debt is contracted, are of course of broader scope. Here, there is no possible implication that only the construction or acquisition of physical improvements can constitute an “ object or purpose ” which has a “ period of probable usefulness ” and that the Constitution permits a local subdivision to incur indebtedness payable thereafter in installments only in order to construct or acquire such physical improvements. Though it is entirely clear that some other “ objects and purposes ” for which indebtedness may be contracted may have “ a period of probable usefulness ” in the future and that when such period of usefulness has been determined the indebtedness may be made payable in installments during such period, it is nevertheless equally clear that not every object or purpose for which a debt is contracted does have such a period of

A judgment for a sum of money constitutes an indebtedness but it is not an indebtedness “ contracted ” by the judgment debtor within the meaning of the constitutional restriction. That provision applies only to indebtedness voluntarily assumed and payable at a stipulated time in the future in accordance with stipulated terms. A judgment is usually imposed in invitum, though it may be for the enforcement of an indebtedness previously contracted; it is immediately payable and enforcible by execution against the property of a judgment debtor who has property which is not exempt from execution, and a municipal corporation may ordinarily be compelled to levy taxes to pay a judgment or other indebtedness which is immediately payable. Enforcement of a judgment out of the property of a judgment debtor will, at times, cause the debtor irreparable damage; and compulsory payment of large judgments against a municipal corporation out of moneys raised by a single tax levy may cause oppressive hardship to the taxpayers. The hardship may be the result of neglect of the officers of the corporation; none the less a court of equity will, at times, relieve the hardship by permitting the municipal corporation to spread over a series of years the assessment and levy of taxes to pay a judgment. So this court decided in connection with the judgments against the city of Long Beach which the city seeks now to pay out of the proposed bond issue. (County of Nassau v. City of Long Beach, 272 N. Y. 260 ; Matter of Coombs v. Edwards, 280 N. Y. 361 . Cf. East St. Louis v. Amy, 120 U. S. 600 .) Can it be said that an indebtedness incurred to pay judgments does not

Judgments, as we have said, may be granted for the enforcement of an indebtedness previously contracted and such indebtedness may have been contracted for objects or purposes which have only transient usefulness of which no trace remains when the judgment is rendered. The Constitution prohibits a municipal corporation from contracting indebtedness payable in the future for objects or purposes of purely transient usefulness and argument is made that an indebtedness contracted to pay a judgment is in effect an indebtedness contracted to pay the obligation which underlies the judgment and may not be made payable at a date when the original obligation is of no continuing use. We are told that -unless the restriction placed by the Constitution upon the debt-contracting power of the local division is so construed, officers of a municipal corporation might defeat the plain purpose of the restriction by the simple expedient of postponing payment of indebtedness until a judgment is obtained by the creditor and then issuing bonds to pay the judgment and in that manner imposing upon taxpayers in the future the burden of paying past expenses of government which no longer serve a useful purpose.

No safeguards imposed by Constitution or statute can give to the public perfect protection against misuse by public officers of powers conferred upon them. For such wrong, the only remedy often lies in the ballot. Here, the Constitution provides the rule to be applied and it has not left to the public officers plenary discretion in the application of the rule. The determination of the period of probable usefulness of the objects or purposes for which indebtedness is incurred is not left to the local subdivisions. That determination must be made “by or pursuant to general or special laws, which determination shall be conclusive.”

“ 22. Judgments. Payment of judgments against the municipality, other than for capital purposes, five years. * * *

The statute constitutes a legislative construction that the provisions of section 2 of article VIII permit a local subdivision to contract an indebtedness payable at a later date for the purpose of funding judgments, where such funding would serve a continuing useful purpose. We may not lightly cast aside such a legislative construction made within a few months after the Constitutional Convention in which members of the Legislature had an influential part and, here, reason would, indeed, constrain us to construe the Constitution in the same manner. Where a levy of taxes sufficient to pay outstanding judgments would cause such undue hardship to the taxpayers that equity will permit the tax levy to be spread over a series of years, an indebtedness incurred to fund the judgment must necessarily serve a useful purpose during the period over which the tax levy might be spread, regardless of the nature or object of the original obligations enforced by the judgments. The Constitution does not prohibit the issue of bonds to accomplish a public purpose where the bonds are payable within the period, as determined by the Legislature, in which the object for which the bonds are issued serves a useful purpose. The Legislature, which determines the period of probable

The judgment should be affirmed, without costs.

Loughran, Finch, Rippey, Sears, Lewis and Conway, JJ., concur.

Judgment affirmed.