Gibbons v. Mobile & Great Northern Railroad , 36 Ala. 410 ( 1860 )

STONE, J.

1. The constitutionality of the legislation, under which the city of Mobile has obliged itself to aid the Great'Northern railroad, is assailed, as not being a legitimate exercise of the taxing power, but a talcing of private property without just compensation, even if the use for which it is taken be public.

This subject has undergone much aud earnest discussion in many of the States composing this Union ; and however grave the subject might be regarded, if it were an open question, we feel bound to consider it, in this State, res adjudicata. In coming to this conclusion, we are not unmindful of the opinion, which must obtain some credence, that we run counter to some of the arguments and illustrations found in the case of Sadler v. Langham, 34 Ala. 311. The principle we are discussing, however, was settled and re-asserted in this court, -long before the case of Sadler v. Langham came up; and on a question involving such momentous results, as does this — one in which the public welfare is so deeply,concerned — we feel it our duty to adhere to the rule, stare decisis.

In the case of Stein v. The Mayor of Mobile, (24 Ala. 591,) a question very like the one we are considering w.as directly presented. "This court reviewed many adjudged cases of sister States, pronounced on the identical question involved in that case and this; and,in a most elaborate opinion, decided, “that the acts authorizing the city authorities of Mobile to levy a tax on the owners of real estate within the limits of the city, to aid in the construction of the'Mobile and Ohio railroad, were constitutional ;” and that although the only legitimate object-of taxation is the support and maintenance of government, yet this purpose embraces a wider range than the mere machinery employed in its administration : that the power authorizes the employment of the necessEiry appliances to augment the aggregate wealth and prosperity of the inhabitants of the city; aud that this may be accomplished by providing outlets for commerce, opening channels of intercommunication with other parts of the State, &c. The Mayor &c. of Wetumpka v. Winter, 29 Ala. 651; Pierce on Railways, 108 to 125, and notes; Redf. on R ilways, 583, and notes; Sharpless v. Mayor, 21 Penn. State R. 147; L. & N. Railroad v. County Court, 1 Sneed, 637.

[2.] As a reason why we should reinstate the injunction in this cause, it has been pressed on our consideration, that the terms of the act, approved February 8th, 1858, (Pamphlet Acts, 165,) were not complied with by the city authorities of Mobile. We deem it unnecessary to institute an inquiry into this subject. Before any aid was extended to the railroad, or determined on by the city, under the act of 1858, the act approved November 29tb, 1859, was passed, which decía, ed, “ that the vote of the people of the city of Mobile, taken on the 21st day of March, 1859, under an act of the legislature of Alabama, approved the 8th of February, 1858, entitled ‘An act to authorize the corporate authorities of the city of Mobile to aid in the construction of a railroad upon a vote of its citizens ’, shall be sufficient authority to the corporate authorities of said city of Mobile, and they are hereby authorized and empowered to aid in the construction of the. Mobile and Great Northern railroad”, &c. So, whether the act of 1858 was complied with or not, the act of 1859 conferred on the city authorities ample power to aid said railroad, to the extent, and under the terms prescribed by the last mentioned act. Pamph. Acts of 1859-60, p. 294.

[3.] The doctrine is well settled, that to authorize a municipal corporation to take stock in, or aid in the construction of a railroad outside ,of the limits of such corporation, there must be an express grant of power. — See City Council v. Plank-road Co., 31 Ala. 76; Pierce on Railroads, 108. The power wa's expressly conferred in this case. It is contended for appellants in this case, that in making their contract, the city authorities transcended the power conferred on them by the statute, in this, that whereas the statute only authorized them to aid in the construction of the railroad by the issue of city bonds, in an amount not exceeding one million of dollars, yet they have in fact issued their bonds and coupons, and furnished them to the railroad, amounting to over two millions of dollars. This argument is more specious than solid. The bonds are for the precise sum of one million of dollars; no more,,no less. These bonds mature at various times, extending from one to twenty-five years. The excess over one million of dollars consists in obliga-, tions, in the shape of coupons, to pay interest on the said one million of dollars, until such time or times as the principal of the bonds shall be paid. This, we think, is in strict conformity with the spirit of the statute, which evidently contemplated that the bonds should be interest-bearing, and therefore marketable., Anything less would not have furnished a million of aid to the railroad.

[4.] It is further urged in favor of a reversal of the chancellor’s decretal order, that by the terms of the contract between the city government and the railroad, no stock is to he issued to the assignee or appointee of the city, for the interest it may pay on the bonds. A full answer to this objection is furnished in the fact, that it would be no objection to the constitutionality of the contract, if no stock had been reserved for either the principal or interest to be paid by the city. The power to aid the railroad resting, as it does, on the taxing functions of the city, and not on the'constitutional provision in relation to the taking of private property for public use, no direct pecuniary compensation to the tax-payers is necessary to uphold it. — See City of Wetumpka v. Winter, and other authorities supra; Pierce on Railways, 115.

[5.] It is further objected to the validity of this contract, that while the acts of. the legislature, and the vote of the people, authorized aid to the railroad • only by bonds, and refused aid by taxation, yet the city authorities have gone beyond this, and aided both by bonds and taxation.

The question submitted to the voters of Mobile, in this connection, was, whether they would aid by taxation upon all property subject to taxation, at a rate not exceeding two per centum per annum, for five years, or by the issue of city bonds, for an amount not exceeding one million dollars. — Ramph. Acts 1857-8, 165. The aid determined on and rendered in this case was by bonds, not exceeding one million dollars, and not by taxation, limited in rate to two per centum per annum, and in duration to five years. The fact that a tax was also levied to meet the bonds, does not change the character of the aid furnished, nor violate the provisions of the statute The real point Was, whether aid should be rendered by heavy and rapid assessments, or by the longer and graduated process of city bonds, distributing the burden through a series of years. Such bonds, whenever, and by whatsoever authority issued, are necessarily an interest-bearing fund. They are, also, necessarily, due at some given time. The accruing interest, at the intervals agreed on, and the principal, at the time of the maturity of the bonds, must be paid. The bonds, being debts of the city, in the absence of a stipulation or specification to the contrary, import, ex vi termini, a duty resting on the city to meet aud liquidate both the interest and principal as they severally accrue. The city authorities, being empowered by the legislature to aid the railroad by bonds, were thereby clothed with the implied power to provide ways and means to meet the liabilities thus incurred, and thus preserve the credit of the city.

In what we have said above, we have considered this question without any reference to legislative restraints resting on the mayor, aldermen and common council of the city of Mobile. The 13th section of the act approved 11th February, 1843, (Pamph. Acts, 116,) declares, “ That from and after the first day of November, A. D. one thousand eight hundred and forty-three, and after the issuing of the obligations provided by this act, it shall not be lawful for the corporate authority aforesaid to issue, in any assignable form whatsoever, any bonds, promises to pay, or city orders, or any form whatsover of promises to pay, transferrable from hand to hand, nor to enter into any contract for the payment of money, unless the means for the payment of the money so contracted to be paid shall be specifically provided at the time of making such contract.” The present bonds are covered by said 13th section of the act of 1843; were issued after the 1st day of November, 1843, and after the issuing of the obliga) tions provided by that act; and it was, therefore, the manifest duty of the city authorities, when they issued these bonds, to provide the means for their payment. If, then, any doubt remained whether the acts, of 1858 and 1859 conferred the authority to provide the means for the payment of these bonds and the coupons, that doubt must be dissipated by the 13th section of the act of 1843, which not only confers the right, but enjoins its exercise as an official duty resting on the city authorities.

"We go beyond the merits of this case, and assert that, in the exercise of a discretion vested in’"the city authorities, as to the plan of providing means for the payment of the interest and principal on the bonds issued for the railroad, we are impressed with the prudence and wise economy which seem to have presided in their deliberations. While it is obvious that the burden has been distributed over a period of' about twenty-five years, in such manner as that the assessment shall be uniform, and at no time oppressive; the light is preserved of applying, at the end of each year, the accruing surplus to the extinguishment of the principal of the bonds; the surplus, for this purpose, being each year increased, by an amount corresponding with the progressive diminution of the annual interest. In this way, all the trouble, risk and expense of an accumulating sinking-fund have been avoided.

[6.] No question in this case has been pressed on our consideration with more earnestness, than that which arises under the 9th section of the act of 1843-. — Pamph. Acts, 115. Its language is: “ That the corporate authorities of the city of Mobile, after the passage of this act, shall not be permitted to purchase real estate,"or borrow money, or create any new debt, for purposes of profit or improvement, without a concurrence of the mayor and boards of aldermen and common council, at their regular meetings, upon a full attendance of all the members of both boards, at a time when there shall be no vacancy in either, and none dissenting to the act; which facts shall all appear on the minutes of the corporation; and any contract, made in violation of this act, shall be wholly null and-void, incapable of being ratified, or confirmed, except in the manner hereinbefore specified.”

For the appellants it is contended, that the bonds brought to view in the present record are the creation of a new debt, for purposes of .profit and improvement; and, inasmuch as the present contract was entered into without a full, attendance of both boards at a time when there was no vacancy in either, and none dissenting to the act, the argument is that the present contract must fall to the ground. The appellees contend, that if section 9 of the act of 1843 be not repealed, then the provisions of that section must be confined to acts of borrowing money, and the creation of new debts, within the powers of the city government as they then existed; and that that section does not reach or control the exercise of powers conferred on the corporation by subsequent legislation. They contend further’, that the acts of 1858 and 1859 confer authority to create a debt for a specified purpose; and that this creation of a new power, without specifying the mode of its exercise, must be understood as so far repealing the 9th •section-of the act of 1843 as to allow the making of the present contract, in the mode and manner poiutecT'out for the performance of acts of "municipal legislation and government.

The act of 15th January, 1844, “to consolidate the several acts of incorporation of the city of Mobile, and to alter and amend the same,” expressly preserves, and exempts from repeal, the act of 11th February, 1843. Pamph. Acts 1843-4, p. 191, § 48.. The 9th section of the act of 1843 is not, then, directly or expressly repealed.

We can not assent to the argument,, that tide acts of 1858 and 1859 repeal, or in any manner impair, the ’9th section of the act of 1843. The acts of 1858 and 1859 are silent as to the mode and solemnity ..which shall attend the official actings and doings of the city authorities, under their provisions. There is no incompatibility between the acts of 1858 -and 1859, and the 9th section of the act of 1843. Both can stand together, and each can be executed without trenching on the other. So clearly is this the case, that if section 9 of the act of 1843 were re-enacted as an additional' section to the acts of 1858 or 1859, no one would suppose that an incongruity would be thereby presented. If, then, the building of the railroad, in aid of which this contract was entered into, comes within the category of profit or improvement, as expressed in the 9th section of the act of 1848, this contract must fall to the ground; for it is not pretended that both boards were full,— none absent, and none dissenting.

Neither can we assent to the argument, in its unqualified terms, that the regulations prescribed in section 9 of the act of 1843 must be confined to the powers which the city government was then authorized to exercise. Its language is, “after the passage of this act.” Its terms embrace all the contracts for the purchase of real estate, all borrowings of money, and all contracts by which new debts shall be created, for purposes of profit or improvement. If the language, of the act of 1843 had been, that the city authorities should not borrow money, nor create any new debt, except for the maintenance of the city government, we should unhesitatingly declare that its provisions embraced this case. What then, we may inquire, was the purpose of the present debt? Was it profit or iviprovement, within' the meaning of the 9th section of the act of 1843? We answer this' question in the negative, and think the following argument and illustration will demonstrate the correctness of our answer.

It is the settled doctrine of this country, that corporate powers are of three kinds: express, incidental, and implied powers. This doctrinéis asserted in the following decisions of this court: City Council of Montgomery v. Montgomery & Wetumpka Plank-road Co., 31 Ala. 83; Ex parte Burnett, 30 Ala. 461; Intendant, &c. v. Pippin, 31 ib. 542, and authorities cited. See, also, Ang. & Ames on Corp. §§ 256-7; Grant on Corp. 13, in margin; Mayor &c. v. Winter, 29 Ala. 651. It is also well settled, that the light to aid in the construction of a railroad, plank-road, &c., lying without the limits of a municipal corporation, is not within the pale of either implied or incidental powers of such municipal 'corporation; but must be expressly' conferred, or it can not be exercised-. — See Mayor &c. v. Winter, supra; City Council of Montgomery v. Plank-road, supra; Pierce on Railways, 108; Redf. on Railways, 533-4, and notes. Now, let us suppose that, in the grant of powers to the city government of Mobile, the legislature had. empowered that body to borrow money, and to create debts, for purposes of profit or improvement; would such grant of power, with-, out more, have authorized the city authorities to aid in the construction of the Great Northern railroad, by a loan to that company of a million of the city bonds? ”We apprehend no one would assert such a proposition. The purposes of profit and improvement would be understood as referring to those ordinary purposes of city policy, which are implied in the fact that the corporation is municipal, or which are expressed in the general grants of power to such corporations, to provide for the health, peace, good order, and general welfare, of the inhabitants. Such grant of power would'not be understood as conferring authority to aid in' the construction of a railroad outside of the city.

Another view: The 9th section of the act of 1844 is a regulation of the power to borrow money, and to'create' new debts, for purposes of profit and improvement. This is a legislative recognition of an existing power in the city government; for the legislature would not perform the senseless ceremony of regulating the exercise of a power which had no existence. The city authorities, then, possessed the power, which the legislature, attempted, in the 9th section of the act of 1843,' to regulate. The power they were regulating was the power to borrow money, and to create new debts, for purposes of profit ,and improvement. Now, if the regulations prescribed in the 9th section of the act of 1843 be broad enough to cover the contract entered into between the city and the Great Northern railroad, it is difficult to resist'the conclusion, that the city authorities would have been authorized to furnish aid to the railroad, without further statutory authority therefor. In other words, the .phrase for purposes of proñt or improvement, in' an enabling clause, would certainly be as comprehensive as the same language would be in tbe restraining or regulating clause. Yet all parties concede, that without the acts of 1858 and 1859, the city authorities would not have had the power to aid the railrohd. The question, then, comes down to this: Power to “borrow money, and to create new debts, for purposes of profit or improvement”, would not have authorized the city government'to aid in the construction of the Great Northern railroad ; the regulations prescribed by the 9th section of the act of, 1843 are, in express terms, limited to acts of borrowing money, and creating new debts, ¡for purposes of profit and improvement; therefore, the regulations provided by the said 9th section do not embrace the contract by which the city authorities bound themselves to furnish a million of bonds to,the Great Northern railroad.

[7.] The 16th section of the act of 1843 does not govern this ease. Its language is, “After the passage of this act, it shall not be lawful for the members of the boards of aldermen and common council to make any contract with the corporate authorities, to do any work, or perform any service for the same, nor shall any appropriation be valid that shall be made for this.” — Pamph. Acts of 1842-3, p. 116. Under the present contract, no member of the board of aldermen or common council is to do any work, or perform any service for the city’ council.

[8.] The 7th section of the act of 1844 (Pamph. Acts of 1843-4, p. 178) requires the mayor, aldermen and common-eouncilmen of the city of Mobile, severally to take an oath, not to be, during their continuance in office, “directly or indirectly engaged in any contract with the corporation, or sell to, or buy from it, any estate, interest, or matter whatsoever.” An argument adverse to the validity of this contract is based on this section. We deem it unnecessary to inquire whether the present contract is covered by the official oath Of the mayor, aider-men and cornmon-couneilmen. If it be thus covered,, a disregard of this duty may éxpose the officers to the imputation of official error, or infidelity. But'there is nothing in the section which declares such act void, or which imposes a penalty for its violation. In such case, if there be nothing more in the transaction, the act will be valid-in law. — O’Connell v. Sweeney, 5 Ala. 467; Ivey v. Nicks, 14 ib. 564; Staples v. Smith, 12 Wend. 57; Foster v. Oxford &c. Railway Co., 14 Eng. Law & Eq. 306; Lefeuvre v. Lankister, 3 Ellis & Blackb. 530; In re Leefe and Wife, 2 Barb. Ch. 39.

[9.] The only remaining question which we propose to-discuss, arises, out of the fact that several members of the two boards — the aldermen and common council of the city of Mobile — were also, at the time of the contract, stockholders in the Great Northern Railroad; being, as-it is alleged,- both bargainors and bargainees. It is not pretended that any bad faith was practiced by the contracting parties; but the argument is, that this contract should be set aside on grounds of public policy. The-rule governing contracts between trustees and beneficiaries is invoked. — See Gilmer v. Calloway, and Payne v. Turner, at the present term. The appellants also invoke! the rule which prohibits a party from being a judge in-his own cause. — See Wilson v. Wilson, at the present term ; and Dimes v. Grand Junction Canal, 16 Law & Eq. 63, 73.

In the great case of Ranger v. Great Western Railway Company, before* the British House of Lords, (27 Eng. Law & Eq. 35,) Ranger, the appellant, had become a very extensive railway contractor'with the company. By the terms of the contract, many matters were made to depend on the decision of the engineer appointed by the company. Mr. Brunei was the engineer. The bill was filed: by Mr. Ranger, alleging an improper discharge by Mr. Brunei of his powers as'a judge or arbiter in the premises; by which, the complainant alleged, he had lost many thousand pounds sterling. He further alleged, that Mr. Brunei was a stockholder in the company, and was, therefore, not indifferent in the premises; and that he (the complainant) had not known this fact, until recently before the bill was exhibited. One question considered •was, whether Mr. Brunei was incompetent, by reason of his interest, to adjudicate the matters which the contract referred to the decision of the company’s engineer. Opin.ions were delivered by Lord Chancellor Cranworth, and by Lord Brougham.

In delivering his opinion, Lord Cranworth said: “When it is stipulated that certain questions shall be decided by the engineer appointed by the company, that is, in fact, a stipulation that they shall be decided by the company. It is obvious that there never was any iutention of leaving to third persons the decision of questions arising during the progress of the works. The company reserved the decision for itself, acting, however, as from the nature of things it must act, by an agent; and that agent was, for this purpose, the engineer. His decisions were, in fact, their decisions. The contract did not hold out, or pretend to hold out, to the appellant that he was to look to the engineer'in any other character than as the impersonation of the company. In fact, the contract treats his acts and their acts, for many purposes, as equivalent, or rather identical. I am, therefore, of opinion, that the principle on which the doctrine as to a judge rests, wholly fails in its application to this case. The company’s engineer was not intended to be an impartial judge, but the organ of one of the contracting parties. The company stipulated, that their engineer for the time being, whosoever he might be, should be the person to decide disputes, pending the progress of the works; and the appeUaut, by assenting to that stipulation, put it out of his power to object, on the ground of what has been called the ‘ unindifferency ’ of the person by whose decision he agreed to be bound. It is to be observed, that the person to decide was not a particular individual, in whom, notwithstanding his relation to the company, the contractor might have so much confidence as to agree to be bound by his award; but any one whom, from time to time, the company might choose to select as their engineer. The appellant alleges, that he did not know the fact that Mr. Brunei was a share-holder, until more than two years after the works had been begun. But he must have known that the company had it in their power to appoint another engineer in Mr. Brunei’s place, who might hold shares; or that Mr. Brunei himself might purchase shares.”

Lord Brougham said: “ He (Mr. Ranger) might have made an exception in his contract, that Mr. Brunei, the engineer, should not hold shares; but that provision was not made. Had this' proviso been made, this absurdity would happen, to which my noble and learned friend has adverted, that although not possessed of shares at that time, he might any day have become possessed of shares —ho''might have purchased them; nay, more, he might have inherited them; they might have cometo him by descent, and then he would have been put in this position — that he must either have given up what had come to him, or have ceased to be the engineer employed by the company; for, if he had continued possessed, either by purchase or inheritance, of a single share, according to the rigor of the argument deduced from Dimes v. Gr. June. Canal Company, he must have ceased to act under these covenants, and the whole operations of the company must at once have been convulsed.”

In the case of Haight and others v. Day, (1 Johns. Ch. 18,) a charter had been granted for a bank, which appointed certain commissioners to receive subscriptions for stock; and empowered them, in case an excess of stock should be subscribed, to apportion the excess among the several subscribers, as they (the commissioners) should judge discreet and paroper. A large excess was subscribed, and the commissioners proceeded to exercise their power of apportionment A bill v?as filed to vacate the alleged apportionment, which charged, that the commissioners had arbitrarily assigned the shares among themselves, their relations, favorites, &c., and had excluded other equally meritorious subscribers. There was, also, a charge of bad faith; but this was denied by, the answer. Chancellor Kent ruled, that “the-word apportion must mean, here, to assign to each subscriber, or give him, such portion as the commissioners deem meet.” The charge of corruption, and of wanton and unworthy exercise of discretion, being repelled by the answer, he dissolved the injunction.

A similar decision was made by Chancellor Walworth, in a most elaborate opinion, pronounced in the case of Walker v. Devereaux, 4 Paige, 229. See, also, Com. v. Ryan, 5 Mass. 90; Cotton v. Evans, 1 Dev. & Bat. 284; Groton v. Hurlburt, 22 Conn. 178; Conn. &c. Railroad Co. v. Bailey, 24 Verm. 465; U. States v. Murphy, 16 Peters, 203; Crocker v. Crane, 21 Wend. 211; Heydenfeldt v. Townes, 27 Ala. 423.

We think, that the power conferred on the corporate authorities of the city of Mobile, to aid in the construction of the Mobile and Great Northern railroad, under such contract with said Mobile and Great Northern Railroad Company as said city authorities might agree upon, must be construed as conferring tbe authority to make the contract on whoever may be the mayor, -aldermen and common council of said city, at the time the contract is entered into; and that, in the absence of actual bad faith, the fact that certain members of the boards' of aldermen and common council are also stock-holders-in tbe rail-road company, does-not, per se, invalidate the contract.

The decree of the chancellor, dissolving the injunction, is affirmed.