PEAKE'V. CITY
of
NEW ORT,EANS.
779
arises out of a statute, the reason being that the action is founded on the statute, and not on contract, and therefore rests upon a specialty. The statute reads: "All actions * * * founded upon any lending or contract without specialty * * * shall be commenced and sued within six years next after tile cause of such action shall have accrued, and not after." Revision N. J. 594. The cause of action in the present case being statutory, I thihk the court should follow the rule of construction laid down in (Jowenhooenv. Freeholders. It follows that this cause of action " is not barred by the statute of limitations, and that the demurreuhould be overruled. Demurrer overruled.
PEAKE: 11. CITY OF NEW ORLEANS. (Oz'rlJ'Uit Oourt, E. D. LouiBiana. <:May 81,1889.)
1.
MUNICIPAL CORPORATIONB---FISCAL' MANAGEMENT-LIMIT, OF I:NDEl!TEDNEB&
2.
In 1858 the legislature of Louisiana adopted a system of drainage for th. city of New Orleans, the work to be controlled by commissioners, and the expense to be defrayed by assessments on the land benefited. Act La., 1871, No. 80, abolished the boards of commissioners and intrusted the control of the work to the, board of administrators of the city., The assessments collected were to be used only as a drainage fund. and the expenses paid by warrants payable therefrom. A constitutional amendment taking effect January 1, 1875, pTohibltedthe city from increasing its indebtedness, but allowed the increase of the debt of the drainage fund. Warrants to complainants were drawn on the drainage fund the adop't,ion of said amendment. Held, that.the city could not be made hable for the amount of the warrants as a muniCipal cor· poration, for mismanagement ,of the drainage fund. whereby a deficit occurred, IilO as to increase its indebtedness. Thesam'e rule applies to warrants issued for the purcnas8 of mfochinery 'authorized by act 1876, No. 16, whi,ch required payment to be made by warrants on the drainage fund.
SAME.
a. 4.
Nor would the city be liable on tbe theory wat it had falsely held out that there was 8 fund available for the payment of the warrants. Failure to collect the assessments and complete the drainage would not render the city liable for the amount of the warrants when it appears that the assessments had been uncollected by tire commissioners. before the city took charge of the work. for 18 years, and that they were uncollectible without incurring cost ee:tual to amount, and that thEl system of drainage was it· self 80 impracticable that failure to complete it was inevitable.
G.
SAME-BONDS
The city having retired bonds issued on the drainage fund 8S authorized by act Hl72. No. 78. and issued in lieu thereof its own bonds. it would be entitled to a credit for the amount of which it had relieved the drainage fund. though the act required the bonds reth'ed to be replaced by bonds payable out of th& , eame fund. '
In Equity.
Bill for account.
R.De Gray and T. J; SenilmeS, for complainant.
780
n:DERAL REPORTER,
vol. 38.
Carleton Hunt, City Before PARDEE
White et Saunders, and Harry T. Hall, for
and BILLINGS, JJ.
PER CURIAM. The complainant having obtained a judgment on tho law side of the court against the city of New Orleans merely as trustee of the "drainage fund" upon certain warrants drawn by the city against that fund, has instituted this suit in equity against the city for an accounting as trustee of the drainage fund. The cause is submitted for a final decree upon the pleadings and proofs. There are also exceptions to the conclusion reached by the master upon the law and the facts. These involve the answers to the questions fundamental to a decision of the cause upon its merits, and therefore the matter before us is what judgment ought to be rendered upon the pleadings and the evidence. In the year 185& the legislature of Louisiana adopted a system of leveeing and drainage in the to be effected through several boards of district commissioners, and provided for raising the necessary funds by authorizing the levy ofa uniform assessment or assessments upon the superficial or square foot of lands situate within the draining'sections or districts. The legislatures of 1859 and 1861 supplemented this act, but left the boards of cOIIlmissioners unchanged. 'fhec'oh'imissioners for the several draining districts continued in office until Apdl,1871, and some canals had been dug by them; but the extent thereof is not shown. In tpis condition of affairs the legislature 'passed act No. 30 ofl871, which abolished the boards of draining commissioners, transferred to and subrogated the board of administrators of the eityof New Orleans to all the rights,powers, and facilities enjoyed by said commissioners, and dire;cte<t'said administrators to collect the balance due ofthe assessments as shown by the books of the First and Second drainage districts, which assessments; were confirmed and made exigible., The board of administrators was also directed by the said act ,to make assessments of two mills per su perficial foot on the lands in the Third draining district and such other lands as might be brought within levees contemplated by the said act No. 30 of 1871; and the 'said:board of administrators were directed to enforce and collect said asand all funds collected were to be placed to the credit of the Mjssissfppi & M:exican Gulf Ship Canal Company, (the corporationthat .was to do' the work under said act No. 30 of 1871,) aud held as a (und to 'be applied solely for the drainage of New Orleans and Carrollton. The 'wi'dth and 'the depth of th e cana,ls. as dug, and the protectionlevees, as built, under said act were to be measured by'the city surveyor, to; be -centifiecl..byhimjtind the administrator ofpublic accounts in the city bf New'Orleans/on presentation tohhn ofsnidsurveyor's certificate, was Wl;l,rralltonthe admfnjstr,aJor of finanpein'payment of.said work at the rate of 50 cents per cubic yard for excavations made, ".and 50 cents per cubic yard for levees built. The warrant thus drawn, it was made the duty of the administrator. offi'l1ancet6 pay oIl-presentation, in case there should be any funds.inthe'city .treasury to the, ctedit
PEAKE V. CITY OF NEW ORLEANS.
781
of the said Mississippi & Mexican Gulf Ship Canal Company; but, should there not be sufficient funds to pay, then said administrator of finance was required to indorse upon the same the date of presentation, after which date the said warrants were to bear interest at the rate of 8 per cent. per annum uutil paid. The first question presented by the exceptions to the master's report, and by the case itself on the merits, is whether the city, as a municipal corporation, .is indebted to the drainage fund for an. assessment to the amount of some $700,000 upon the public streets and public squares. The legislature levied a tax upon a certain area, and by a subsequent act made the owners persona)ly liable. It is difficult to conclude that the legislature ever meant to subject public things to a lien for a tax, which of course would carry with it the right to foreclose the lien, and to sell the public thing. .A.gain, it is difficult to see how the city of New Orleans, who is simply c}:larged with the administration of a public thing, is an ow.ner. As an original question,. we should be inclined to hold that the assessment levied was intended by the legislature to be. put upon the property within the designated area, exclusive of the public streets and squares. On the other hand, the commissioners actually as,. sessed the public streets and squares, and put down the city as owner, apparently in accord the views of the supreme court of the as expressed in Draining Co. Ca,se, 11 La.Ann. 377, decided under the drainage act of 1835; and the legislature thereafter (act No. 300f1871) affirmed the aSsessments already rimde. This point need not be def· initely decided by us; as" even if the city owed the amount of tbis assessme-llt to the fund, it has, in our opinion, according to the proofs, much more than paid it. . The second question we are called upon to decide is: Does the evidence establish any such neglect, or misapplication,or .diversion in the city's administration of the drainage fund, as to make her liable as a munici. pal c01'1Joration? It is important to observe that it is admitted that early warrll.nts drawn against the drainage fUl}d, up to January 1,1875, had been fully pai.d and retired; that the constitutional provisio.n prohibiting the city's debt from being increase..i. in. any manner whatever went into operation on thatday; and that the complainant's warrants were drawn after that day. It has been urged that the contract of the Mississippi & Mexican Gulf Ship Canal CompAny under act No. 30 of 1871, out of which the drainage warrants arose, could not be impaired by the constitutional amendment. This is conceded. But that contract stipulated only for the issue of warrants to .be" drawn against the drainagfl fund, and the constitutional amendment allows this. But this poes not help the complainant. The prohibjtion of the the city increasing her own debt. The provision of the ment was to increAse, as 'Y.llS desirable and proper, the debt of age fund. .These warrants, being on ,their and in expre15sterpls" payable only fro111. the drainage fund, andhllving .been iSS\le4,lll;\d a,.s all implied, ,for work done to the .amen4ment: ,or takers. .warrants toolc the i,nhiPltic:>uof
P'EDERAL1l.EP()RTER,
voL 38.
the constitution stamped npon them, and they calln:6f.,either by the or· ders of the' city officials or:inanyother way, be permitted to increase the 'city's;(jwn debt.' ., , It' was utged that a 'portion of these warrants,viz., upwards of maohineryand con· $300,000 of them, was for the purchase price of tract,which the 'legislature authorized the city to buy', as provided in act No; 16"of1876'. The answer to this argument is that, while the city was'bythe'·legislature required to buy, it was required to pay in warra'nts'ltgainst the drainage fund. This class of warrants was placed, therefore; by the' legislature in precisely the same category as the other drainagewarrati!tsissued for work. The holders of them were as far from paving :a claim against the city as were the holders of the other warrants against the fund j land with' reference to both classes of warrants no rights spring up which would in<lrease the debt of the city of New Orleans totbe holders of either <lIassof warrants. This view would, in our opinion, beconcltisive upon this question, even Hit had been established that the city had violated any of its duties as trustee. , It islilso urged by the solieitors of the complainant that there is an e<luity in favor of the complainant, which approaches that of a holder of purely negotiable security, iIi that there was a holding()ut on her part that there was a fund, whEmthere was none available: We'think the faritso! the case show that the city, under legislative mandate, issued the a fund created by the entirely separate from her own funds; This the warrants disclosbd in the plainest tetms.There' w,as no guaranty asked; nor given, nor iDlplied. The right 'was thlitofbeing paid out of a particular fund, which was, created and disposed of by the legislature. Hence "there can be no enlargement of the rightsoftbeholder beyond that expressed in the instrument. Nor do'we'find in the record evidence of negligence on the part of the city which'$ho'tlld be treated as waste, or create any eharge beyond that uponthefuhtl. The two grounds upon which this charge is sought to be mail'ltainedJare (1) failure on the part of the defendant to collect the assessments,and (2) failure on its part to push on the work of drainage, whereby the la.nds subject to the tax would have been rendered valuable 'lmough tolia:vepllid the imposed tax. As to failure to collect, when these llsl!le8sillEmtswere handed over to the city to collecl, they had been assessed 13 years, a.nd for that period had been in the hands of commis· !sioners created expressly for the conduct of the drainage system, and !with no other business. If such bureaus had failed to collect for l:Iuch a peri{,d" the inference is strongly forced upon us that the asseSSments ;were"substantially uncollectible,especially by a municipal corporation; herselNn'l1shed by debts. This' is corroborated by the outcome of the iM.ndantu8prodeedings taken by Van Orden, transferee of the company; 'andaa warrll.nt'holder, to compel the city to issue writs of fieri facias 'against the, owners in 1876.'fo the application for that writ the city answered that the cost of the prheeeding would 'e<llla1, tnher opinion, the amount realized. The result ·showe& her estimate to be nearly cor· rect, for the cost of the 125 writs selected by the warrant-holders-and
PEAKE. ,t;, CITY OF NEW ORLEANS.
783
therefore presqmably the best for. the &34,000 i !lnd, amount collected under only, $36,000. · .' Whatever else we 'have been impressed with upon this groundqfcomplaint has equal force when considered with reference to the., second ground of alleged fault on the part of the city,-failure to complete the system of projected drainage. In our opinion, the failure to collect and the failure to complete were due to the system of drainage as created and modified by the legislature, and would have occurred no matter who had been charged with its execution. A brief statement of the leading features of the original scheme of the legislature, and its subsequent m,odi;fications, will"we think, demonstrate this, The tax was arbitrarily levied upon each square foot of the district at a uniform rate without any regard to the value of the land. This, taken in connection with anothjlr provision, that no land. should be sold for taxes unless the· price. it brought, should be equal to the tax levied, rendered the collection of,a large portion, of the tax a sheer impossibility,as the land was wor;th less than the tax. It is urged by the complainant's solicitors that the completion of the system would have raised the value of the submerged lands, but this conclusion. must rest upon the premise that those who were to do the work of draining would be willing to look for payment to a tax to be, collected, out of submerged lands, which had not ,sufficieJ;lt value to pay the imposed assessment. Then.it is to be observed that the availability of these drainage assessments was still further diminished by the act of the legisla;ture which stripped the, assessment of all connection with the owner, leaving no resource except against the ,and the Supreme court of the state held that land sho.uld not be subject, which had received no benefit. , to Rny A final embarrassment, \Vhich any trustee would have found diffl,cult to overcome, should be Inentioned, viz., that by the act No. aO,of 1871 the legislature sele,cted a contractor, and fixed the rate per cubic foot to be paidfor excavations at within 15 cents of three times the original estimate for. the work; ,and, though the system was less than .two-thirds the amquntof in cubic feet, as determ,ined by the proper authority \;lithe legislature, that up()1J the assessments were calculated. It may be ad4eCi that the city was(lntirely without means to prosecute the work to' completion. She was prohibiied by the constitution from in any manner or form increasing her debt. The drainage funds were, as shown herein, inadequate and /lnd, already burdened with 8. debt of over$6qO,000on, account of'drainage warrantso'titstanding, Ill'short, the systern of drainage halil remained incomplete, 'and has failed, because it was an unwise and inadequate system, where every nlotive springihg from human cupidity was against its success, and where provision odginally inadequllote-jwllS prices established by the legislature itself. , charges, amounting to it is o urged the city illegally a.llowed and paid out of fund. ThatfQr the & Philips was clearly uponthefti,od, for tit' was 'ofthe' entiiefund. Tliatforthe by
784
FEDERAL REPOHTER,
Van Orden was imposed by the very act of transter to the city, was publicly and was as, well known and as subject to opposition in the courts by the warrant-holders as to resistance from the city, and was in goo,dfaith intended for the benefit of the trust fund. We think the payment fot lega:l services to the then city attorney was an error, and would perhaps make the city liable for that amount,-some $14,000. then fall into the same class as the assessments upon This the public streets, etc. ' There remains to be considered how much the city has paid out for the fund by taking up warrants outstanding against it and substituting her own absolute obligations. According to the master's report, the city retired $1,600,000 of the drainage warrants, and gave therefor her own absolute 7 per cent. 50-year bonds. ,She did this under the act 73 of If, as we think, that act required her to issue bonds of the same te110r as the warrants which she took up, i.e., payable out ofthe fund, then the case would be that ofa trustee who, by error, had paid out money, or issued securities for the benefit of the estate of the cestui que trust, in which case she would be credited with the amount to the extent of which , sbehad relieved the fund. On the other hand, if the legislature meant , to have the citfillsue its own bonds, it then becomes a question of legislative intent as to how the forced assumption should be treated. Referring to the act; we find the bonds were to be marked "Drainage Series;" were to be paid out of the drainage fund after the payment of the warrants; ,and that,no other provision' whatever was made for retiring or paying' the priricipal. We think it clear that bonds thus to be issu d by a trustee, even if they were intended to be absolutely her own, and thus to ,be paid, were intended to be charged against the fund, and that ,the, city is a cre(#1or to that extent Of the fund. This would leave the city a creditor agllinstthe fund to the amount of $1,600,000, and if we should oonsider her a debtor to the fund to the amount of the assessments on the public streets and squares, and for the $14,000 paid to the city attorney, theamount of $714,000, it would still leave a balance in , in her fa vor of nearly $800,000. Let the report of th,e master be amended so as to conform to this opinion, and, upon that being done, let the bill dismissed cost of complainant·
.
et al.
t1. HOUSTON
& T. C. Ry, Co. et al., CAR Cd., Intervenor.)
(PULLMAN PALACE
«()ircuit CQurt, E. D. Texa8. Mf1Y
1:
Where receivers of a railroaocoropany, under an order of colirt authoriz· Ing theroto.take charge of all the company's property of every description, , ,.including leases. carryon the road, and have the use and benefit of certain ':'leeping·cars, with knOWledge of the terms of Q lease under which the cars , 'were held ,'lLod used by the 'company, they become the assignees of the company, and .re. bound to perform its covenants a8 to the Care and return of the leased cars. ,.
nECErVERS-LU:BILITY ON COVENANTS OF INSOLVENT.