New Orleans v. Benjamin , 14 S. Ct. 905 ( 1894 )

153 U.S. 411 (1894)

NEW ORLEANS
v.
BENJAMIN.

No. 981.

Supreme Court of United States.

Submitted January 12, 1894. Decided May 14, 1894. CERTIFICATE FROM THE CIRCUIT COURT OF APPEALS FOR THE FIFTH CIRCUIT.

Mr. William A. Maury, Mr. Henry C. Miller, and Mr. E.A. O'Sullivan for the city of New Orleans.

Mr. J.D. Rouse and Mr. William Grant for appellees.

MR. CHIEF JUSTICE FULLER, after stating the case, delivered the opinion of the court.

The first and third questions propounded relate to the jurisdiction of the Circuit Court, which was invoked on two grounds: (1) that the case was one arising under the Constitution of the United States; and (2) on diverse citizenship.

1. When a suit does not really and substantially involve a dispute or controversy as to the effect or construction of the Constitution, upon the determination of which the result depends, then it is not a suit arising under the Constitution. Shreveport v. Cole, 129 U.S. 36; Starin v. New York, 115 U.S. 248, 257; Gold Washing and Water Co. v. Keyes, 96 U.S. 199.

The judicial power extends to all cases in law and equity arising under the Constitution, but these are cases actually and not potentially arising, and jurisdiction cannot be assumed on mere hypothesis. In this class of cases it is necessary to the exercise of original jurisdiction by the Circuit Court that the cause of action should depend upon the construction and application of the Constitution, and it is readily seen that cases in that predicament must be rare. Ordinarily the question of the repugnancy of a state statute to the impairment clause of the Constitution is to be passed upon by the state courts in the first instance, the presumption being in all cases that they will do what the Constitution and laws of the United States require, Chicago & Alton Railroad Co. v. Wiggins Ferry Co., 108 U.S. 18; and if there be ground for complaint of their decision, the remedy is by writ of error under section 709 of the Revised Statutes. Congress gave its construction to that part of the Constitution by the twenty-fifth section of the Judiciary Act of 1789, and has adhered to it in subsequent legislation.

But assuming that such repugnancy might be so set up as to form an independent ground of jurisdiction in the Circuit Court, it becomes necessary, in order to dispose of the inquiry whether such a dispute or controversy was really involved here, to refer to certain legislation of the State of Louisiana.

By act No. 74 of 1868, (Acts La. 1868, 85,) the parishes of Orleans, Jefferson, and St. Bernard were united into a district, called "the Metropolitan Police District of New Orleans, State of Louisiana," and a board created, styled the "Board of Metropolitan Police," upon which were conferred the powers and duties pertaining to police government and discipline in that district, with power to issue warrants and certificates for the payment of the police and other expenses. These expenses were to be borne by the cities, towns, and parishes of the district, and apportionments or estimates thereof were to be made annually by the board against each of the cities and parishes, which were to be "binding upon the respective cities and towns interested therein," and the cities, towns, and parishes were empowered and directed to annually levy and collect taxes to raise the sums of money so estimated and apportioned, to be paid over to the state treasurer and constitute a fund to be paid out on warrants as provided.

By act No. 44 of 1869, (Acts La. 1869, 42,) and act No. 92 of 1869, amending and reënacting the original act, (Acts La. 1869, 92,) warrants issued in payment of the salaries of officers, employés, and members of the Metropolitan police in accordance with act No. 74 of 1868 were made receivable for all parish and municipal licenses and taxes within the limits of the Metropolitan police district, provided the aggregate so received in each current year should not exceed the amount of the apportionment for that year.

By act No. 41 of 1870, (Acts La. 1870, 74,) all warrants, checks, and orders issued in payment of the salaries of Metropolitan police, and all warrants, checks, and orders issued, or that might thereafter be issued, for the supplies and expenses of the board, were made receivable for all police and municipal taxes and debts to become due for the police of New Orleans, Jefferson, and Carrollton, provided that the aggregate of such warrants, checks, or orders so received in each current year should not exceed the apportionment.

By act No. 33 of 1874, (Laws La. 1874, sec. 4, pp. 68, 70,) it was enacted, among other things, that all Metropolitan police taxes should be collected in cash, and that it should be unlawful to receive in payment for said taxes any warrants of indebtedness of any kind whatever, provided that warrants and certificates issued prior to January 1, 1874, should still be received for taxes due for the years prior to that date.

In 1875, (Laws La. 1875, 35, No. 16,) an act was passed, to the effect that the total amount of apportionments should be divided into twelve equal parts, and that weekly settlements of taxes collected should be made, and that, whenever the city of New Orleans or any city or parish making part of the police district should fail to pay the full amount of its pro rata share for any month, the tax bills should be transferred to the Metropolitan police board for collection.

By act No. 35, passed at an extra session of the legislature in 1877, and approved March 31, (Acts La. Ex. Sess. 1877, p. 57,) the acts of 1868, 1869, 1870, and 1875, above referred to, and other acts upon the subject, were repealed, and the police system transferred to the city.

It was ordained by the constitutional convention of 1879 "that all taxes and licenses due any parish or municipal corporation prior to January 1, 1879, may be payable in any valid warrants, scrip or floating indebtedness of said parish or municipal corporation, except judgments." (Acts La. 1880, Constitution, etc., 68.) And by act number 49 of 1880, (Laws La. 1880, 48,) it was enacted that all parish or municipal corporations should "receive for all taxes and licenses due said parish or municipal corporations prior to January 1, 1879, all valid warrants, scrip or evidence of indebtedness of said parish or municipal corporations, except judgments, without any discrimination as to what year said warrants, scrip or evidence of indebtedness shall have been issued, provided, that all valid Metropolitan police warrants or scrip for the years 1874, 1875, and 1876 shall be receivable only for that portion of the tax levied for the Metropolitan police fund and no other, without any discrimination as to the year in which said warrants were issued or said taxes levied."

This bill was framed upon the theory that the city of New Orleans, the city of Kenner, and certain parishes were debtors for the amount of the apportionments as to each of them made by the police board during the eight years of its existence, (from 1869 to 1876 inclusive,) and that there was a large balance due on said apportionments which constituted a fund for distribution among the creditors of that board. The bill stated that the assets of the board at the time it was abolished "were the amounts due to it by said city of New Orleans and by the other defendants as herein stated," and that "the aggregate amount of such indebtedness to said board largely exceeds the total amount of its debts and liabilities." It was also, however, averred that the city of New Orleans, "annually, during the whole period of the existence of said board, included in her budget of expenditures the amount thus apportioned to her, and in pursuance of said authority, levied taxes for the purpose of paying the same;" and "has from day to day and from year to year, ever since the passage of the repealing act of March 31, 1877, aforesaid, continued to collect the taxes levied as aforesaid, for the purpose of paying the apportionments of said city for police expenses, as aforesaid made, and notified thereto; and is now making such collections and enforcing the payment of taxes levied for that purpose, and now has a large sum of money thus realized, which is applicable to the payment of said city's indebtedness to said board of police, and ought to be distributed among the creditors of said board in reduction of their claims, including those of your orator."

The prayer of the bill was that an account be taken of the debts, liabilities, and unpaid dues of every kind of said board of Metropolitan police; that an account be taken of the amount due by each of the defendants to the board "for the balances of their unpaid apportionments of police expenses, as well as of all police taxes collected by them and withheld from said board;" that a receiver be appointed, to whom the defendants be decreed to pay their several pro rata shares of the amount found to be due to creditors of the board, including costs; and that the funds thus realized be applied to the payment of complainant's warrants, certificates, and claims, and of such other persons as may be creditors of the board, and who should come in and establish their claims; and also to the payment of interest, expenses, and costs. The bill averred that, by act No. 35 of 1877, acts No. 74 of 1868; No. 44 of 1869; No. 94 of 1870; and No. 16 of 1875, and other acts not enumerated were repealed, and the eleventh paragraph of the bill contained the allegation upon which the contention rested that the suit was one arising under the Constitution of the United States, it being averred: "That said repealing act was in violation of section 10, article 1, of the Constitution of the United States, in that it impaired the obligation of the contracts made by said board of Metropolitan police, with its officers and employés and others, to whom it was indebted, and who had contracted with and rendered services to said board, upon the faith of said provisions of law for the enforced payment and collection of the sums due to it as aforesaid, from the several cities and parishes within said district, out of which funds only they could be paid, and to that extent said act was and is null and void."

The city of New Orleans demurred to the bill for want of equity; because the city had never been liable as a debtor directly upon the apportionments; and, because, so far as the payment of the warrants and certificates was enforceable through the levy of taxes, such levy, if needed, could not be directed in this proceeding. The demurrer was overruled and the city answered. The answer denied that the act of 1877 either changed or attempted to change or affect in any manner or degree the rights or remedies of the holders of the warrants and certificates; denied that the apportionments had ever been debts of the city, and averred that they were designed simply as the basis on which the city was to levy the Metropolitan police taxes; denied that tax levies already made or the means of collection were interfered with, and maintained that under the Metropolitan police acts its only liability was for taxes collected, of which it had then none in its hands.

The jurisdiction in equity in this case is found in the inadequacy of the remedy at law, either because the rights claimed could not be enforced at law or because they could not be administered in that forum. The bill was manifestly framed to bring the case within the class in which receivers are appointed to collect the assets and pay the creditors of a dissolved corporation. Broughton v. Pensacola, 93 U.S. 266, 268; Meriwether v. Garrett, 102 U.S. 472, 527. Indeed, it was expressly averred that the state courts had proceeded upon that principle in respect of similar warrants and certificates, and reference was made in terms to a decision of the Supreme Court of Louisiana in that behalf. Harrison v. City of New Orleans, 40 La. Ann. 509. The contention was that the holders of these warrants had a right to bring an action at law against the board of police to recover thereon, and that the dissolution of the board left the complainants without remedy except in a court of equity, judgment and execution at law not being required because impossible by reason of the dissolution of the board. Therefore the court in chancery was appealed to to lay hold of the assets of the board as in the nature of a trust fund and apply them to the payment of the claims. Those assets, as shown by the bill, were the apportionments, the tax levies, and the taxes collected. These were the means provided by law for the payment of debts created by the board, and if they were left unaffected by the repealing act the alleged impairment had no basis to rest on. That act was essentially a mere change of an instrumentality of municipal government. It abolished the police organization established in 1868, and vested in the city the function of maintaining its own police. This legislation was not in contravention of the Constitution of the United States, and was enacted in the exercise of the undisputed power of the State in that regard. In making the change no obligation rested on the State to create an independent and corporate successor of the board or to provide for the application of its assets to the payment of its debts if existing laws were ample to effect that purpose. In that view the city of New Orleans remained for all purposes, so far as creditors were concerned, the representative of the board, and if the city were under a liability to pay the apportionments in cash, it was not absolved from that liability by the dissolution of the board. Although the creditors could not avail themselves of the instrumentality of the board to sue for the apportionments, (if that could ever have been done,) still, as those apportionments had all been made and taxes had been levied and were in course of collection to pay them, or so much thereof as was needed to pay the warrants and certificates, the act of 1877 left the city of New Orleans to respond as before to the creditors in reference thereto, and the remedies to which they could resort were quite as efficient as they ever had been.

In New Orleans v. Gaines' Administrator, 131 U.S. 191, it was held that under the jurisprudence prevailing in Louisiana a creditor might exercise the right of action of his debtor, a right analogous to the garnishee or trustee process in some States, and that this right could be enforced in a Federal court by a suit in equity on the principle of subrogation. But if this bill could be maintained on the doctrine therein recognized, or if the equitable principle of apportionment as between parties charged with a common burden were applicable as justifying equity interposition, the result on the point under consideration would be the same. Jurisdiction could not be obtained upon the bare averment of an anticipation that the city might rely on the repealing act as wiping out apportionments, tax levies and tax collections, and that the state courts would so decide. And the bill made no such specific averment, with which, indeed, many of its allegations were wholly inconsistent; while the defence of the city not only rested on no such ground, but the answer denied that the repealing act was susceptible of that construction or could be given that effect.

This would be equally true if, as suggested by counsel for the city, the board could never have been treated as a debtor, (unless it had collected taxes under act No. 16 of 1875, and retained them,) inasmuch as it had nothing to do with raising the sums apportioned to the local authorities, upon whom alone the duty was devolved to accomplish that through the exercise of the power of taxation, and the holders of warrants and certificates could from the first only have resorted to the police fund created through the medium of the annual apportionments.

In any aspect, the decision of the questions involved did not depend on the Federal Constitution. The construction or application of that instrument in one way would not defeat complainants, nor in another sustain them.

We are not dealing with a writ of error to review the final judgment of the highest court of a State in a suit wherein the validity of a statute of the State was drawn in question on the ground of repugnancy to the Constitution of the United States and the decision was in favor of its validity, but with the original jurisdiction of the Circuit Court, sought to be sustained on the ground that the cause of action arose under and was dependent upon the Constitution.

We are of opinion that the case made upon bill and answer did not really and substantially involve a dispute or controversy as to the effect or construction of the Constitution, upon the determination of which the result of the suit depended. Reference is made in the argument to the fact that the city filed a demurrer which was overruled, but the first question is confined to the case on bill and answer, and, moreover, the filing of the demurrer could not, under the circumstances, give jurisdiction to the Circuit Court, if it did not otherwise exist.

This conclusion covers the second question, which specifically inquires whether there was an impairment of the obligations of the contract arising upon the warrants and certificates by reason of the repeal of laws making them receivable in payment of licenses, taxes, and other debts. Of course there was no such impairment by the act of 1877, if that act left in force substantially the mode of payment of warrants provided by existing laws, and the bill did not attack act No. 33 of 1874, which suspended the tender of warrants and certificates for taxes except for the years prior to January 1, 1874, while under the ordinance of 1879, by act No. 49 of 1880, the police warrants or scrip for 1874, 1875, and 1876 were made receivable for police taxes without discrimination as to the year in which the warrants were issued or the taxes levied.

The bill did not claim the right assumed by the second question to have been taken away; but it was insisted that the warrants and certificates were payable "in cash," and it is argued that the act of 1880 was itself an impairment in making them receivable for taxes, which might restrict their payment in money. The difficulty with this second question is that the bill does not seek to compel the city to receive the warrants and certificates for taxes; but on the other hand, demands that they be paid in cash under the theory that the city owes the amount of the apportionments, or has taxes collected on hand, so that no dispute or controversy as to the receivability of the warrants and certificates, determinative of the case, was involved.

The Circuit Court cannot be given jurisdiction by the suggestion of the impairment of a contract in respect of which the complainant seeks no relief, and there is here no averment raising such an issue.

2. We have seen that the ground of equitable cognizance relied on is that the holders of these warrants and certificates had the right to bring an action at law against the board of police to recover thereon, and that the dissolution of the board left the complainants without remedy, except in a court of equity, judgment and execution at law not being required because impossible by reason of the dissolution of the board. It is insisted that the city stands in the position of a debtor for taxes collected on police board apportionments and for the amount of the apportionments themselves, so far as outstanding. If this were so, and the police board were still in existence and liable to suit, then complainants would be obliged to recover judgment against the board and proceed against the city by way of creditor's bill to enforce the collection. Granting that this could be done without judgment after and because the board had ceased to exist, nevertheless the claims of complainants must be established under the bill precisely as they would have to be in an action at law. Although it is ingeniously said that the suit is one to "establish a fund," this does not change the fact that it is a suit to recover on the warrants and certificates, and then enforce their payment by a decree over against the city. The establishment of a fund is, in this instance, only another name for the ascertainment of an indebtedness of the city to the board, available to the creditors of the board, after their claims as such are judicially determined.

By the first section of the act of March 3, 1887, c. 373, 24 Stat. 552, amendatory of the act determining the jurisdiction of Circuit Courts of the United States, as corrected by the act of August 13, 1888, c. 866, 25 Stat. 433, no Circuit or District Court has cognizance of any suit to recover the contents of any promissory note or other chose in action in favor of an assignee unless such suit might have been prosecuted in such court to recover the said contents if no assignment or transfer had been made.

This provision was taken from the eleventh section of the Judiciary Act of 1789, and carried forward into section 629 of the Revised Statutes, and was designed to prevent the evasion of the discrimination in respect of suits between citizens of the same State and suits between citizens of different States, established by the Constitution and laws of the United States.

It appears in the act of March 3, 1875, c. 137, 18 Stat. 470, in somewhat different phraseology, and the restriction as to suits on promissory notes was removed; but it was restored by the act of 1887.

In Sheldon v. Sill, 8 How. 441, it was held under the act of 1789 that the endorsee of a negotiable promissory note, secured to the payee by a mortgage, could not sue in the courts of the United States to foreclose the mortgage, unless the mortgagee could; but this was necessarily ruled otherwise under the act of 1875. Tredway v. Sanger, 107 U.S. 323.

As remarked by Mr. Justice Blatchford in Corbin v. County of Black Hawk, 105 U.S. 659, 665, "the contents of a contract, as a chose in action, in the sense of section 629, are the rights created by it in favor of a party in whose behalf stipulations are made in it which he has a right to enforce in a suit founded on the contract; and a suit to enforce such stipulations is a suit to recover such contents." In that case it was held that a suit to compel the specific performance of a contract, or to enforce its other stipulations, is a suit to recover the contents of a chose in action, and not maintainable in the Circuit Court by an assignee, if it could not have been prosecuted there by the assignor, had no assignment been made.

In Shoecraft v. Bloxam, 124 U.S. 730, 735, it was said by Mr. Justice Field that the terms used in the statute "were designed to embrace the rights the instrument conferred which were capable of enforcement by suit." And see Plant Investment Co. v. Key West Railway Co., 152 U.S. 71.

In Walker v. Powers, 104 U.S. 245, it was held that the assignee of a judgment founded on contract could not maintain a suit thereon in a court of the United States unless such a suit might have been prosecuted there if an assignment had not been made. Mississippi Mills v. Cohn, 150 U.S. 202.

The facts in Ober v. Gallagher, 93 U.S. 199, were these: Thompson, a citizen of Louisiana, purchased from Fleming, a citizen of Arkansas, a plantation situated in Arkansas and gave his notes for the purchase price, secured by a lien reserved in the conveyance, which notes Fleming transferred to Gallagher, a citizen of Louisiana. Gallagher afterwards sued Thompson in a court of Louisiana and recovered judgment. At the time of the purchase there was a judgment in Arkansas against Fleming upon which the lands were sold and conveyed to Ober, to whom Thompson also conveyed them. Gallagher afterwards filed his bill against Ober, a citizen of Arkansas, and Thompson, who had become a citizen of Tennessee, praying that the land might be subjected, under the lien reserved in the deed of Fleming to Thompson, to the payment of his judgment. Fleming at the time of the commencement of the suit had also become a citizen of Tennessee, and it was objected that, as Fleming and Thompson had both become citizens of Tennessee and therefore Fleming could not sue Thompson in the courts of the United States, Gallagher could not maintain the suit; but this court held that Gallagher, a citizen of Louisiana, was entitled to enforce the lien on the land, in Arkansas, against Ober, a citizen of Arkansas, and Thompson, a citizen of Tennessee, in collection of the judgment in which the note had become merged.

Mr. Justice Story in Bean v. Smith, 2 Mason, 252, held that the Circuit Court had jurisdiction on the ground of diverse citizenship in a suit in equity brought by a judgment creditor to set aside conveyances made after suit commenced, and a few days before the term at which judgment was expected to be obtained, in fraud of such creditor, although the judgment was recovered in the state court on a negotiable chose in action on which before judgment a suit could not have been maintained in the Circuit Court. But there, as Mr. Justice Story observed, the right to sue the fraudulent grantees was not a right which had vested in another person and passed to complainant by assignment; and as to the fraudulent grantor the right was a new right growing out of a direct judgment between the parties and a fraud injurious to complainant, which had been devised to avoid the satisfaction of that judgment.

The case before us is not of that character. If the board had not been abolished, judgment could not have been recovered against it by complainants in the Circuit Court; and if a judgment had been recovered by them in the state court, a creditor's bill would have been merely ancillary to the judgment, and could not have been entertained in the Circuit Court as an original bill. Upon the facts appearing in this record, the assignees would have acquired no new and independent right of recovery, by reason of the judgment, not possessed by the assignors. The board being abolished, recovery of a judgment was dispensed with, but the establishment of the claims was still required as the basis for further relief, and that relief involved nothing more than recovery over, or a direct decree within the principles of New Orleans v. Gaines' Admr., supra, analogous to judgment on garnishee process. The suit must, therefore, be regarded as a suit to enforce the payments of the warrants and certificates, and as such, a suit to recover their contents, and this is so on any other ground of equity jurisdiction which has been suggested.

In our judgment the pleadings show a suit to recover the contents of choses in action, and, as the bill contained no averment that it could have been maintained by the assignors, if no assignments had been made, (from the statement accompanying the certificate it appears affirmatively that it could not,) the jurisdiction of the Circuit Court cannot be sustained on the ground of diverse citizenship.

The first question is answered in the negative, and the third in the affirmative, and it will be so certified.

MR. JUSTICE WHITE took no part in the consideration and decision of this case.