« ForrigeFortsett »
cedure by which the taxes in question are to be assessed and collected. The county auditor and treasurer are designated by the Legislature as the instrumentalities by which the bondholders are to be afforded a remedy. Its provisions which relate to the assessment and collection of the tax are a part of the conditions of the contract which induced the bondholders to invest their money, and cannot be destroyed by any legislative acts passed subsequent to the issue of the bonds in pursuance of former acts of the Legislature. "By the obligation of a contract is meant the means which, at the time of its creation, the law affords for its enforcement." Nelson v. Police Jury of St. Martin's Parish, 111 U. S. 720, 4 Sup. Ct. 648, 28 L. Ed. 574. "The obligation of a contract, in the constitutional sense, is the means provided by law by which it can be enforced, by which the parties can be obliged to perform it." Louisiana v. New Orleans, 102 U. S. 206, 26 L. Ed. 132. It cannot be doubted that the constitutional amendment of 1903 was intended to impair the means provided by law for the payment of these bonds. To this extent it is obnoxious to article 1, § 10, of the Constitution of the United States.
Mr. Justice Swayne, in delivering the opinion of the court in Walker v. Whitehead, 16 Wall. 317, 21 L. Ed. 357, said:
"The Constitution of the United States declares that no state shall pass any law impairing the obligations of contracts.' These propositions may be considered consequent axioms in our jurisprudence: The laws which exist at the time and place of the making of a contract, and where it is to be performed. enter into and form a part of it. This embraces alike those which affect its validity, construction, discharge, and enforcement. Nothing is more material to the obligation of a contract than the means of enforcement. The ideas of validity and remedy are inseparable, and both are parts of the obligation which is guarantied by the Constitution against impairment. The obligation of a contract is the law which binds the parties to perform their agreement.' Any impairment of the obligation of a contract-the degree of impairment is immaterial is within the prohibition of the Constitution. The states may change the remedy, provided that no substantial right secured by the contract is impaired. Whenever such a result is produced by the act in question, to that extent it is void. The states are no more permitted to impair the efficacy of a contract in this way than to attack its vitality in any other manner. Against all assaults coming from that quarter, whatever guise they may assume, the contract is shielded by the Constitution. It must be left with the same force and effect, including the substantial means of enforcement, which existed when it was made. The guaranty of the Constitution gives it protection to that extent. The effect of these propositions upon the judgment before us requires but a single remark. A clearer case of a law impairing the obligation of a contract, within the meaning of the Constitution, can hardly occur."
The attempt to abolish the township and destroy the machinery for taxation, and to transfer the territory to another county, is a direct attack upon the remedy which is given the petitioner by the acts which authorized the issuance of the bonds, and the fact that the attempt is made by constitutional enactment does not give it any additional force. The provisions of the acts of 1882 and 1885 which relate to the assessment and collection of taxes are a part of the conditions of the contract which induced the bondholders to invest their money, and this contract cannot be impaired. The authority for an annual tax for the payment of the bonds being granted by the Legislature at the time of the issuance of the same, cannot be revoked by the Legislature, unless
some other remedy equally as efficacious is provided as a substitute. In the case of Hicks v. Cleveland, 45 C. C. A. 429, 106 Fed. 459, Judge Simonton, in discussing this phase of the question, said:
"The Supreme Court of the United States deals with the provisions of statutes like this as creating a trust which the state, the donor, cannot annul, and which the officers to whom the power is given are bound to execute. So neither the state nor the corporation can any more impair the obligation of the contract by repeal of the act than they can in any other way."
Broughton v. Pensacola, 93 U. S. 266, 23 L. Ed. 896; Von Hoffman v. Quincy, 4 Wall. 553, 18 L. Ed. 403; Mount Pleasant v. Beckwith, 100 U. S. 514, 25 L. Ed. 699.
If the payment of debts could be defeated by the means employed in this case, then there would be no security as to any contracts which the individual might enter into in cases wherein the power to contract is derived from legislative authority. The law does not contemplate that any one shall be permitted, directly or indirectly, to repudiate an honest obligation. The act of 1885, which vested the township with corporate functions, was passed solely for the purpose of this contract, and as such was intended to afford the bondholders a safe and sure remedy. It did not undertake to incorporate the township as a general municipal corporation. It simply gave the township certain functions to be exercised solely and exclusively for the purpose of making and discharging the contract, and the provisions of the same thereby became a part of the essential elements of the contract, and do not in any wise partake of the character of the powers ordinarily conferred upon a township or other territory in order to enable such township or territory to exercise the functions of a municipal corporation. Therefore the constitutional enactment in question is not aimed at a municipal corporation, but is in the nature of a direct attack upon legislation which has for its object the enforcement of a contract.
No one questions the power of the Legislature at any time to abolish a municipal corporation, provided that in doing so it does not impair the obligation of a contract. But in this instance the acts in question do not have the effect of abolishing a municipal corporation as such, the constitutional and legislative enactments being directed against the means by which the holders of the bonds are to be paid the amounts due them.
In the case of Von Hoffman v. Quincy, 4 Wall. 553, 18 L. Ed. 403, among other things, Mr. Justice Swayne, who delivered the opinion of the court, said:
"It is competent for the states to change the form of the remedy or to modify it otherwise, as they may see fit, provided that no substantial right secured by the contract is thereby impaired. No attempt has been made to fix definitely the line between alterations of the remedy which are to be deemed legitimate and those under the form of modifying the remedy impair substantial rights. Every case must be determined upon its own circumstances. Whenever the result last mentioned is produced, the act is within the prohibition, and to that extent void."
We now come to consider the question as to whether the means provided as a remedy are in any way connected with that part of the act which confers corporate powers upon the township. If the contention that the Legislature had the right to destroy the corporate existence
of the township be true, we are nevertheless confronted with the fact that the instrumentalities and means employed by the Legislature in this instance for the purpose of enforcing the collection of a tax are still unimpaired. The duties of the officers designated for the assessment and collection of taxes are not affected in any manner by the acts which undertook to abolish the township. In other words, even though it should be held that the township as a corporate entity no longer exists, however, the remedy which is provided for the collection of taxes remains unimpaired. Therefore, if the contention of respondents that the township is abolished be correct, then we have the act which makes the levy and authorizes the assessment and collection of taxes in a certain territory for the payment of an indebtedness evidenced by bonds upon which judgment has been obtained in a regular manner; the instrumentality for its collection remains the same as when the act in question was passed. The county auditor and treasurer are not officers or agents of the township in any sense of the word. Inasmuch as the acts of 1882 and 1885 constitute the county commissioners the corporate agents of the township, and at the same time authorized the county auditor and treasurer to perform duties incident to the assessment and collection of taxes that are separate and distinct from those assigned to the county commissioners, it cannot be contended that the Legislature intended to authorize the auditor and treasurer to act as agents of the township. The act provides that the county commissioners shall be the agents of the township, and clothes them with discretionary power, to wit, the power to issue bonds when certain conditions have been complied with. The power which was conferred upon them has been exercised by the issuance of the bonds, and, since they have performed the duties incumbent on them as agents of the township, they are powerless to do anything further in the premises. It is different when we come to consider the authority which was conferred on the county treasurer and auditor by the Legislature. While the duties of the county commissioners were simply to issue the bonds and deliver the same, the county auditor and treasurer are authorized and empowered to do that which may be lawfully done independent of the corporate existence of the township.
In this case a judgment has been obtained, and the liability of the township for the payment of these bonds judicially determined. The court is now called upon to enforce the laws of the state existing at the time of the execution of the bonds, the provisions of which enter into and constitute an essential element thereof. Conceding that the constitutional enactment is valid, and that it has had the effect to abolish the corporate existence of the township, we cannot escape the conclusion that the means and procedure provided for the enforcement of the contract remain unaltered. The officials chosen by the Legislature as instrumentalities for the assessment and collection of the tax are in existence, and it is the duty of the court to compel the enforcement of the same, irrespective of the result of any attempt which may have been made to abolish the township. It is contended by the respondents that the territory of township Ninety-Six as a subdivision of the county of Abbeville no longer exists as such, and that the same has been trans
ferred and embraced as a part of one of the territorial subdivisions of the county of Greenwood, and therefore the court is without authority to compel the auditor and treasurer of the new county to enforce the assessment and collection of the tax in the territory which formerly was included in the county of Abbeville. This position is untenable, and cannot be sustained. The creation of the new county of Greenwood and the transfer of the territory of township Ninety-Six to said county as a part of its territory do not alter the status of the territory thus transferred in so far as it is affected by the acts of 1882 and 1885, which provide that the county auditor and treasurer shall assess and collect annually a tax upon the property included in said territory. It has been repeatedly held that, where a subdivision of the state has contracted a debt, such debt follows the people of the newly acquired territory. In cases where an indebted municipality is divided among other municipalities, the debt follows the territory, and the duty of assessing and collecting taxes applies to the new officers in whose jurisdiction it comes. Broadfoot v. Fayetteville, 124 N. C. 478, 32 S. E. 804, 70 Am. St. Rep. 610; Mobile v. Watson, 116 U. S. 289, 6 Sup. Ct. 398, 29 L. Ed. 620.
Counsel for respondent insist that it will work a hardship upon the property owners of the township to compel them to pay taxes to meet the obligations of the contract from which they can never realize any benefit. The unfortunate condition which the property owners now occupy is due in a large measure to the failure on the part of the Legislature at the time of the passage of the act to provide that the bonds should not be issued until the railroad had been completed through the territory in question. While the contention of the respondent as to the lamentable condition of the township is true, it is equally true that a failure on the part of the inhabitants of the township to comply with the obligations which they entered into at the time the bonds were issued will work a hardship on the owners of the bonds, who are innocent purchasers, and who are in no wise responsible for the issuance of the bonds in the first instance, nor for the failure of the railroad company to complete its road through the territory in question.
In view of the foregoing, it is ordered that a writ of mandamus issue directed to the said auditor and treasurer of the county of Greenwood, commanding the said auditor to assess upon the property in said township a sufficient per centum to pay said judgment and costs, and to continue to assess from year to year, and commanding said treasurer of said county to collect such tax so assessed, and pay over the same upon said judgment until the same is wholly satisfied.
In re MERTENS et al.
(District Court, N. D. New York. August 6, 1904.)
1. FEDERAL COURTS-BANKRUPTCY JURISDICTION-CLAIMS TO PROPERTY. Under Bankr. Act July 1, 1898, c. 541, subc. 2, § 2, 30 Stat. 545 [U. S. Comp. St. 1901, p. 3420], as amended by Act Feb. 5, 1903, c. 487, § 1, 32 Stat. 797 [U. S. Comp. St. Supp. 1903, p. 409], providing that courts of bankruptcy shall have such jurisdiction at law and in equity as will enable them to exercise original jurisdiction in bankruptcy proceedings to cause the estates of bankrupts to be collected, reduced to money, and distributed, and determine controversies in relation thereto, a court of bankruptcy has jurisdiction to try and determine the title to property found in the possession of the bankrupt, which had been purchased by and delivered to him, the sale not having been rescinded for fraud until after the bankruptcy proceedings had been instituted and the bankruptcy court had taken possession of the property.
Where the seller of goods, which had been delivered to the buyers prior to the institution of bankruptcy proceedings against them, rescinded the sale for fraud after the bankruptcy proceedings had been instituted, and applied to the court in which such proceedings were pending for leave to commence a replevin action for the goods in the state court against the receiver in bankruptcy, and after such petition was denied again applied for an order directing the receiver to set aside and hold the goods in question for petitioners which was also denied, such seller thereby became a party to the bankruptcy proceedings, and was bound to prosecute its claim to the goods in the court where such proceedings were pending.
Such goods having been taken possession of by the bankrupt's receiver, and having been thereafter sold by such receiver as the bankrupt's trustee under order of court, such court had jurisdiction to grant au injunetion restraining the claimant from prosecuting a suit against the trustee in a state court for conversion of the proceeds, under Rev. St. U. S. § 720, providing that an injunction shall not be granted by a court of the United States to stay proceedings in a state court except in cases where such injunction may be authorized by any law relating to proceedings in bankruptcy.
4. SAME-BANKRUPTCY PETITION-FILING.
The filing of a bankruptcy petition is notice to the world of the pendency of the proceedings, and operates as an attachment of the bankrupt's property, and as an injunction restraining all persons from intermeddling therewith.
5. SAME-ACTS OF TRUSTEE.
Where a bankrupt's receiver and trustee took possession of property in the hands of the bankrupt at the time the petition was filed, and the seller of the property to the bankrupt did not elect to rescind for fraud until after such proceedings had been instituted, the bankrupt's trustee was not liable to the seller for the conversion of the property or its proceeds by selling the same under order of the court of bankruptcy.
This is a motion by Albert K. Hiscock, as receiver and as trustee of the estate in bankruptcy of J. M. Mertens & Co., to restrain the American Woolen Company of New York from further prosecuting an action brought by said company against said Albert K. Hiscock as such receiver and as such trustee to recover damages for the alleged conver