New Orleans v. Warner

after making the above Statement of the Case, delivered the opinion of the court.

Nineteen assignments of error were filed in this case, but we shall only notice such as were pressed upon our attention in the oral arguments or in the briefs of counsel.

1. That this suit was, at the institution thereof, prescribed by the statutes of Louisiana. In this connection reference is made to Articles 3540, 3544 and 3547 of the Civil Code.

Article 3540 provides that “actions on bills of exchange, notes payable to order or bearer, except bank notes, those on all effects negotiable or transferable by indorsement or delivery, and those on all promissory notes, whether negotiable or otherwise, are prescribed by five years,” etc. Even though it could be assumed in this case that this bill was an “ action on ” these drainage warrants, we think they do not fall within the description of either of the instruments specified in Article 3540. These warrants are in the form of an order, drawn by the Administrator of Accounts upon the Aministrator of Finance, directing him to pay to the order of W. Yan Norden, transferee of the Mississippi and Mexican Gulf Ship Canal Company, a certain amount "out of any funds in the city treasury to the credit of said company.” They also contain the following memorandum: “ This warrant is issued in accordance with the provisions of Act 30 of the session of the General Assembly of the .State of Louisiana, held in the year

This instrument is neither a bill of exchange, a promissory note, a note payable to order or bearer, nor an effect negotiable, by indorsement or delivery. The construction given to Article 3540 by the Supreme Court of Louisiana confines it to unconditional promises to pay a fixed sum of money on a day certain, whether the obligation be negotiable unoR-r F- aw-merchant or not. Conditional obligations which lack these essential characteristics do not come within its provisions. Baird v. Livingston, 1 Rob. (La.) 182; Bank of Louisiana v. Williams, 21 La. Ann. 121 ; Thompson v. Simmons, 22 La. Ann. 450 ; Jouett v. Erwin, 9 La. Ann. 231 ; Gasquet v. Directors, 45 La. Ann. 342 ; King Iron Bridge Co. v. Otoe County, 124 U. S. 459 .

As these warrants were not only payable out of a particular fund to the credit of the Canal Company, but were only payable when there were funds to the credit of such company, . we think it entirely clear that they are not included within the terms of Article 3540.

We are also referred to Article 3544, prescribing, “in general,. all personal actions, except those before enumerated,” by ten years, and to Article 3547, which enacts that “ all judgments for money, whether rendered within' or without the State, shall be prescribed by the lapse of ten years from the rendition of such judgments. Provided, however, that any party interested in any judgment may have the same revived at any time before it is prescribed,” etc., in which case it “ shall continue in full force for ten years from the date of the order of court reviving, the same.” This latter article.is

But we think a decisive answer to the argument upon both these articles is found in the contract of June 7, 1876, wherein the city purchased of Yan Norden the drainage plant, and contracted “ not to obstruct or impede, but, on the contrary, to facilitate, by all lawful means, the collection of the drainage assessments as provided by law until said warrants have been fully paid, it being well understood and agreed by said parties thereto that collections of drainage assessments shall not be diverted from- the liquidation of said warrants and expenses as hereinabove provided for, under any pretext whatsoever, until full and final payment of the' same.” In respect to this we adhere to the opinion pronounced by us when this case was first before this court, that the city in respect to this purchase acted voluntarily ; that it was not, as had been held in the former case of Peake v. New Orleans, 139 U. S. 342 , with respect to other warrants, a compulsory trustee, but a voluntary contractor; that as the fund was to be partly created by the performance by the city of a statutory duty, it could not deliberately abandon that duty, or take active steps to prevent the further creation of the fund, and then plead a prior issue of bonds as a reason for evading liability upon the warrants. As the city had paid for the property in warrants drawn upon a particular fund, it was under an implied obligation to do whatever was reasonable and fair to make that fund good. Certainly it could not so act as to prevent the fund being made good, and then require the vendor to look to the fund and not to itself. The duty of the city to collect these assessments was affirmed in State ex rel. Van Norden v. The Mayor etc., 27 La. Ann, 497 . See

Having thus voluntarily assumed the obligations of a trustee with respect to this fund, it cannot now set up the statute of limitations against an obligation, which, as such trustee, it had undertaken and failed- to perform. The rule is well settled that in actions by cestuis qui trust against an express trustee, the statute of limitations has no application, and no length of time is a bar. While that relation continues, and until a distinct repudiation of the trust by the trustee, the possession of one is the possession of the other, and there is no adverse relation between them. Perry on Trusts, § 863. In Oliver v. Piatt, 3 How. 333 , 411, it is said that “ the mere lapse of time constitutes of itself no bar to the enforcement of a subsisting trust; and time begins to run against a trust only from the time when it -is openly disavowed by the trustee, who insists upon an adverse right and interest, which is fully and unequivocally made known to the cestui que trust.” To set the statute in motion the relation of the parties must be hostile, and so long as their interests are common, or their relations fiduciary, as in the case of landlord and tenant, guardian and ward, vendor and vendee, tena.nts in common, or trustee and cestuis qui trust, the statute does not begin to run. Zeller’s Lessee v. Eckert, 4 How. 289 ; Seymour v. Freer, 8 Wall. 202 ; Lewis v. Hawkins, 23 Wall. 119 . This doctrine has been applied in Louisiana in favor of an administratrix having claims against the estate, in which it is held that, as she cannot sue the estate, the statute will not run against her on her claims against the estate, so long as she is administratrix. Succession of Farmer, 32 La. Ann. 1037 ; McKnight v. Calhoun, 36 La. Ann. 408 . A like ruling was made with respect to taxes levied for a particular purpose, as to which the city was held to be a trustee, in School Directors v. Shreveport, 47 La. Ann. 1310 .

This trust has never been repudiated by the city. In fact, one of the defences set up in the answer was that the city had applied itself with great diligence, and to the full extent of its ability, to improve aud make serviceable the drainage work

At the time the assessment rolls were homologated and the judgments against the city were rendered, there was no claim made that the city was not responsible,'or that the public grounds, streets and squares were not assessable for these improvements ; and in so far as the collection of these judgments is concerned, the city stood in the same relation of trustee to the warrant holders which it did with respect to the assessments upon private property.

The argument that the city repudiated its trust by the abandonment of the work of drainage in 1876, is untenable. Indeed, by the very act of February 24, 1876, under which the city was authorized to purchase the Canal Company’s plant, the city was given exclusive control of all the rights, powers and franchises formerly invested in the Canal Company, and authorized to do all the drainage work required to be paid for by assessments upon property, or from the city treasury. What was this purchase made for if not to continue the drainage work? It can scarcely be supposed that the city purchased this plant with a view of discontinuing such work. If it were abandoned at that time it might readily be supposed that such abandonment was temporary, and that the purchase was made in good faith, and for the purpose for which it should have been purchased, namely, the prosecution of tho work.

We deem it entirely immaterial whether the assessments

2. A defence of res adjudioata, not noticed by the court below, is set up as arising from the decree of the Circuit Court, affirmed by this court in the case of Peake v. New Orleans, 139 U. S. 342 . This plea is based upon the fact that in that, case one James Jackson appeared by intervening petition as. the holder of eight purchase warrants, identical in character with those sued upon by the complainant — part of those given in payment of the purchase price of the draina'ge plant from the Canal Company and Yan Norden; that the decree in the Peake case was a dismissal of complainant’s bill and of all intervening petitions, and that the decree upon the warrants sued upon by Jackson was decisive of-the whole series of purchase warrants. It is a sufficient reply to this plea to say that the complainant Warner was neither a party nor a privy to this litigation, and that the decree was binding only upon Peake and such others as actually intervened. Hook v. Payne, 14 Wall. 252 . Indeed, the attempt to identify these warrants with those which were made the basis of Jackson’s intervention was evidently an afterthought, as the city in its answer, while setting up the decree in the Peake case, makes no mention whatever of the intervening petition of Jackson, and relies upon the final decree of this court, 139 U. S. 342 , which turns only upon defences applicable to the Peake claim.

But the case so far from being res adjudicata of. this is not even á -decisive authority. The complainant Peake was a holder of warrants issued to the Mississippi and Mexican Gulf

In the case under consideration the complainant bases his suit upon $6000 of warrants given for the purchase of the drainage plant. The obligations of the city with respect to, these are measured, not by the act of 1871, but by the act of February '24, 1876, authorizing such purchase, and by the contract of sale, wherein the city agrees to facilitate by all lawful means the collection of the drainage assessments, and to apply the same to the liquidation of these warrants. In respect to these warrants we held, when this case was first before this court, 167 U. S. 467 , 477, that the city Acted vol

For these reasons we hold that there is not only no room for a plea of res adjudícala, but that the Peake case is not to be considered as a controlling authority.

' 3. The gravamen of the bill is that, after the purchase of the drainage plant, the city became possessed of the sole power of completing the system of drainage, that it became its duty to do so or to establish some other system; but that from the very date of the purchase the city ceased all work, sold some of the boats and machinery purchased, diverted the proceeds of taxes to other purposes than that of the payment of drainage warrants, allowed other boats to rot and sink, and also permitted the canal dug by the company to fill up with sediment. Further, that the city did nothing to enforce payment and collection of the drainage taxes, but adopted an ordinance advising drainage taxpayers not to pay, whereby, by reason of her conduct in abandoning her system of drainage, the Supreme Court of Louisiana in Davidson v. New Orleans, 34 La. Ann. 170 , decided that such taxes could not be enforced and collected. That by this and other means it destroyed the drainage fund, until now the same has become unenforceable and worthless to the holders of the warrants.

In this connection the city averred in its answer that it had performed its full.duty in relation to the collection of assessments against private property, but admits that the proclamation referred to in the bill advising property owners not to pay drainage assessments was issued by the mayor under authority of an ordinance of the city. It further alleged that the drainage plans made by the Canal Company were so defective that their completion would have been of no benefit to the property

That the city is estopped to plead the issue of bonds as a discharge of its obligation to the holders of these purchase warrants, was settled upon the prior hearing of this case. Warner v. New Orleans, 167 U. S. 467 , 477. In this connection we said: “ That one who purchases property, contracting to pay for it out of a particular fund, and issues warrants therefor payable out of that fund — a fund yet partially to be created, and created by the performance by him of a statutory duty — cannot deliberately abandon that duty, take active steps to prevent the further creation of the fund, and then, there being nothing in the fund, plead in defence to a liability on the warrants drawn on that fund, that it had prior to the purchase paid off obligations theretofore created against the fund.”

Prior to the purchase of the Ship Canal Company’s plant from Yan Norden, the legality of these drainage assessments had been affirmed by the Supreme Court of Louisiana. In the matter of the Commissioners of- the First Draining District,

With reference to its alleged neglect in this particular the Court of Appeals found that all the facts averred in the bill had either been admitted by the answer, or abundantly established by evidence. When the city purchased the drainage plant it seems to have been in good condition, and although the work had been about two thirds completed, the city not only abandoned the work but proceeded to disqualify itself from undertaking it. In April, 1878, an ordinance was adopted instructing the Administrator to advertise the dredge boats for sale. Although this does not seem to have been carried out, another ordinance was adopted' in July requiring three boats, which were then in bad condition, to be broken up and the material stored. Subsequently, and in April, 1881, the mayor was authorized to issue and did issue a proclamation advising the people not to pay their drainage taxes until the question was decided by the Supreme Court, although the validity of these taxes had been determined in the case above .cited. This expected decision was delivered in March, 1882,

We do not appreciate the equity of now permitting the city to set up this decision as an excuse for its failure to collect these assessments, since the decision itself is based upon the fact that the city had been derelict in abandoning the work, and failing to carry out in good faith its contract with Van Norden. The Court of Appeals further found that, so far as the answer attempted to fasten the responsibility for the alleged defects in the drainage plant upon Van Norden, its transferee, as a defence to this action, it was entirely unsupported by the evidence, as counsel for the city very frankly admitted in their argument at the hearing. Under the act of February 24, 1871, authorizing the Ship Canal Company to undertake the work, power was reserved to the City Board of Adihinistrators to designate the location of the canals and levees to be built by the company, subject to certain specifications provided by the act, to build and run all the pumps and drainage machinery necessary to lift the water from the canals into Lake Pontchartrain, and to keep the water in the canals at the proper level for the work of excavation, and at the same time assist the drainage of the adjacent lands. It

4. If the city be not estopped, by consenting to the homologation of the assessment rolls — in other words, consenting to the judgments against itself — to question its liability for the assessments upon its streets, squares and other public places, or by drawing these warrants against the drainage fund, we think the validity of those assessments sufficiently appears from the opinions of the Supreme Court of Louisiana sustaining similar assessments upon public property. The argument is that public property, being exempt from taxation, is also exempt from these assessments; but the authorities have long recognized a distinction between general taxes, which are for the benefit of the public generally, and which in the nature of things the public must directly or indirectly pay, and spe

This was apparently the view taken by the Supreme Court of Louisiana in the case of The New Orleans Draining Co., 11 La. Ann. 338 , 377, in which it is said of similar assessments that “ the large portion of the expenses which, by this view, is thrown upon the city for the streets, meets in some measure that equity which has been urged upon our consideration, that as this work has been undertaken for the public good, the public ought to bear the charge of it, notwithstanding the benefit of it to the owners of the soil.”

In Marquez v. City of New Orleans, 13 La. Ann. 319 , property owners upon a certain street refused to pay more than one half of their assessments for paving, upon the ground that the city owned a promenade located in the centre of the street opposite the paved road. It was held that the city should pay one half of the entire cost of paving, upon the ground of its ownership of this public ground. This case was subsequently approved in the similar case of Correjolles v. Succession of Foucher, 26 La. Ann. 362 , and in Barber Asphalt Paving Co. v. Gogreve, 41 La. Ann. 251 , 259.

In the County of McLean v. Bloomington, 106 Illinois, 209, it was also claimed that public property, being expressly exempt from taxes, was also qxempt from special assessments. But, said the court, “ we have been too long and too firmly committed to the doctrine that exemption from taxation does not except from special assessments to now admit that it is even debatable. . . . The distinction' between taxation and special assessment is also clearly made in our present constitution, and while providing that the General Assembly may exempt the property of the State, counties and municipal corporations from the former, section 3 makes no provision-in regard to the latter, but, on the contrary, . . . authorizes the General Assembly to vest the corporate authority of cities,

There is nothing in the several statutes of Louisiana upon the subject which indicate that private property only was intended to be affected. It is true that by the act of 1858, § 7, the District Court is empowered to decree that each portion of the property situated within the draining limits is subject to a first mortgage, lien and privilege in favor of the Board of Commissioners for such amount as should be assessed upon such property for its proportion of the cost of the draining; and that this was obviously intended not to apply to public property. But while it is doubtless true that public property was not intended to be chargeable with a lien under which it might be sold and title pass to private parties, it by ho means follows that the city is not liable, and that in such cases the amount should not be paid out of the treasury. Adams County v. Quincy, 130 Illinois, 566. Indeed, something of this kind seems to have been contemplated in the act of February 24, 1876, § 4, where the city was given the power of doing all the drainage work “ required to be paid for by assessments upon property, or from the city treasury.” This would seem to contemplate that the drainage work applicable to public property was to be paid for by the public out of the municipal treasury. Indeed, it is improbable that, if the cost of draining the streets and public squares was to be included in the proportion which each parcel of private property was to contribute as its share of the expense, no mention was made of this or of the manner in which the liability of each private owner for his proportion of the expense of draining the public property was to be ascertained. That the city was itself liable was evidently the view taken by the city officers when the assessment rolls were homologated.

As the Boards of Drainage Commissioners assessed the city for the expense of draining its public property, and the legislature approved all these assessments in the act of February 24, 1871, and the city subsequently assented to the homologation of these assessment rolls, except in the first district, and to judgments against itself for the amount of the assessments, it is difficult to see upon what principle it can now after a lapse of more than twenty years raise the question of its liability. We know of no reason why these judgments should not be treated as conclusive. A judgment for taxes does not differ from any other in respect to its conclusiveness. United States v. New Orleans, 98 U. S. 381 ; Driggers v. Cassady, 71 Alabama, 529, 533; Cadmus v. Jackson, 52 Penn. St. 295 ; Freeman on Judgments, § 135; Mayo v. Foley, 40 California, 281;

5. The only other assignment of error we are required to •notice is that the court erred in holding that the constitutional amendment of 1874 (Laws of 1874, page 56, Joint Resolution No. 22), limiting the power of the city of New Orleans to contract debts, was not a complete defence to this suit. This amendment is as follows:

“The city of New Orleans shall not hereafter increase her (its) debt in any manner or form or under any pretext. After the first of January, 1875, no evidence of indebtedness or warrant for the payment of money shall be issued by any officer of said city except against cash actually in the treasury ; but this shall not be so construed as to prevent . . . the issue of drainage warrants to the transferee of contract under act No. 30 of 1871, payable only from drainage taxes, and not otherwise.”

The argument is that the act of February 24, 1876, authorizing the purchase by the State of the drainage plant and franchise, is null and void, because it had the effect of increasing the debt of the city in violation of the supposed prohibition contained in said constitutional amendment of 1874.

At the time .this amendment was adopted, the act of February 24,1871, which provides for the drainage of New Orleans, was in force. This act authorized the Ship Canal Company to undertake the drainage of the city under the general direction of the Board of Administrators, and to provide' funds for the payment of the work, directed the Boards of Drainage Commissioners to turn over to the Board of Administrators “all moneys, assessments and claims of drainage in their hands,” including all judgments iri favor of the commissioners, authorized the Board of Administrators to collect from the holders of property within the draining districts the balance due on the assessments, as shown by the books, “ which said assessments are hereby confirmed and made exigible, at such timé and in such manner as the Board of Administrators may designate; provided, that the said board shall collect the said assessments herein authorized in time to

The assessments, both against the city and individuals, which constitute the debt from which the warrants are .to be paid, Avere all in existence long prior to this amendment, and were reduced to judgments at sundry times from 1861 to 1873. It seems, however, that the city concluded to do this work itself, and applied to the legislature for authority to purchase of Yan Norden his drainage plant and to undertake itself to do the drainage work. This authority was granted by the act of February 24, 1876, under Avhich the contract was made with Yan Norden to purchase the plant, and to pay therefor the sum of $300,000 in drainage warrants as a consideration for the property, and also in full settlement of all claims for damages which the Canal Company or Yan Norden had against the city. To provide for the payment of these warrants the city agreed that the rights of the holders of such warrants should remain unimpaired, and that the drainage taxes should be administered and paid under certain conditions, and their collection assigned to an officer to be selected

We think it was the intention of the constitutional amendment to validate the issue of the drainage warrants to the transferee of the contract, not only for the work done but for the property purchased by the city, in case it should elect to do the work itself. The act of 1876 did not so much authorize an increase of the city’s debt as a diversion of the warrants to the purchase of the drainage plant instead of a payment to the transferee for work done. We think the amendment should receive a construction commensurate with the object intended to be accomplished, namely, the drainage of the city, whether such drainage were carried out by Van Norden or by the city itself, and that it should not be limited to such warrants as were to be issued for the work. The debt for the assessments had already been incurred and put in judgment, and the amendment was intended to recognize the existence of such debt, and to provide that the warrants issued in payment of the same should not be treated as within the scope of the amendment. Beyond this, however, these warrants were to be issued not only in payment of the drainage plant but in settlement of Van Norden’s claims against the city for damages connected with the failure of the city to carry out its contract with the Canal Company and Van Norden, which, in view of the fact that the drainage plant had been purchased by him for $50,000, may be assumed to have been the greater part of the consideration.

Indeed, it is open to serious consideration whether the reservation of drainage warrants in the constitutional amendment of 1874 was necessary, in view of the fact that the assessments had already been reduced to judgments against the city and the property owners, and that the further issue of drainage warrants was rather in the nature of the payment of a debt already incurred than the creation of a new obligation. There can be no question that the amendment was not designed to impair the validity of a debt already legally incurred, and that if it had attempted that, it would have been hostile to the provision of the Federal Constitution against impairing the obligation of a contract.

It may be that the city made a bad bargain. It may be that it paid far more than the fair value of the property and claims purchased. It may be that the action of the common council was dictated by improper considerations, though this is rather hinted at than asserted; but from the case of Fletcher v. Peck, 6 Cranch, 87 , 130, to the present time we have uniformly refused to inquire into the motives of legislative bodies. In this case Mr. Chief Justice Marshall, speaking for the court, observed : “ That corruption should find its way into the governments of our infant republics, and contaminate the very source of legislation, or that impure motives should contribute to the passage of a law, or the formation of a legislative contract, are circumstances most deeply to be deplored. How far a court of justice would, in any case, be competent, on proceedings instituted by the State itself, to vacate a contract thus formed, and to annul the rights acquired under that contract by third persons having no notice of the improper means by which it was obtained, is a question which the court would approach with much circumspection. It may well bo doubted how far the validity of a law depends upon the motives of its framers, and how far the particular inducements operating on members of the supreme sovereign power of a State, to the formation of a contract by that power, are exam

7. The objection that the decree finds the city a debtor to the complainant in the amount of the warrants is more apparent than real, since it also declares that he is entitled to be paid out of the drainage assessments, refers it to a master to state an account of such assessments, and provides for an absolute decree against the city only if the fund established by the accounting shall be sufficient, and for a pro rata decree if such fund be. not sufficient to pay all the warrant holders in full.

There was no error in allowing interest except as to amount. The act of 1876, authorizing the city to purchase.the drainage plant, declared that the consideration should be paid in drainage warrants, issued in the same form and manner as those theretofore issued under the act of 1871 for work done. This act of 1871 provided that if there should not be sufficient'funds to cash the warrants when issued, the Administrator of Finance was required to indorse upon them the date of presentation, after which such warrants should bear interest at the rate of eight per cent until paid. The warrants also made this provision upon their face. But there was no presentation for payment as the statute and warrants required, and there was no waiver of such presentation. In 1876, it is true, the city abandoned the work, but the whole of complainant’s case rests upon the theory that there was no repudiation of the trust, or of the obligation to do whatever was possible in the collection of the assessments. If, then, the.trust continued so as to charge the city as trustee, the obligation of the complainant to take

But the commencement of suit was a sufficient demand to charge the defendant the interest from that day, Fuller v. Hubbard, 6 Cowen, 13, 22, at the rate specified in the contract. It is true, the cases of Brewster v. Wakefield, 22 How. 118 ; Burnhisel v. Firman, 22 Wall. 170 , and Holden v. Trust Co., 100 U. S. 72 , hold that, where there is a promise to pay upon' a certain day with interest at an exorbitant rate, the creditor is only entitled to interest after that time by operation of law and not by any provision in the contract; although if the local law be different, this court will follow it. Cromwell v. Sac County, 96 U. S. 51 , 61; Ohio v. Frank, 103 U. S. 697 . These very cases, however, recognize the principle that, if the parties themselves have fixed a rate to be paid up to the time of payment, that rate will be respected. In this case both the statute and the warrants provided that such warrants shall bear interest at the rate of eight per cent “ until paid,” and we are therefore of opinion that complainant is entitled to that rate from November 26, 1894, the date of filing the bill and issuing the subpoena.

While this opinion does not cover all the assignments of error, it disposes of all questions raised by counsel in their briefs, and

Our conclusion is that the decree of the Court of Appeals be modified in respect of the date from which interest is to

Mr. Justice White and Mr. Justice Peckham did not sit in this case and took no part in its decision.