Thom v. Mayor of Baltimore

The General Assembly and the city government have, of course, complete control over the city and its affairs except to such extent as they may be restrained by constitutional provisions.Groff v. Frederick, 44 Md. 67, 78; Pumphrey v. Baltimore,47 Md. 145, 152. And their enactments are presumed to be valid, and must be accepted as such until some conflict with the constitution clearly appears; and when there remains doubt of the existence of a conflict the enactments must be left standing.Hagerstown v. Sehner, 37 Md. 180, 190; Davis v. Helbig,27 Md. 452, 462; Miller v. State, 124 Md. 385, 389; McCurdy v.Jessup, 126 Md. 318. The constitutional clause to be considered here, article 11, section 7, merely requires that no debt shall be created by the city unless it be authorized by an act of assembly, and by an ordinance submitted to popular vote and approved by a majority of voters. This, it is contended, denies the Legislature and the city government power to reduce the rate of interest on an issue of city stock for a debt previously authorized at the higher rate specified in an ordinance submitted to vote, unless a popular vote is taken on the reduced rate, too. And two arguments have been advanced in support of the contention.

It is argued by the appellant that this constitutional clause requires that the ordinance for the issue of stock be submitted and approved by popular vote, and that everything which may be included in an ordinance so submitted and approved, being founded on the constitutional requirement, must have a constitutional force and effect beyond change by legislation or ordinance alone. But, assuming that the clause does require submission of an ordinance rather than some simpler form of proposal for the debt, the argument seems to me to be untenable because the constitutional clause has a limited purpose, its requirement must be limited to that purpose, and it cannot reasonably be construed to lend constitutional force or effect to anything and everything which the city may include in a loan ordinance. It must be confined in its effects to that which is inserted in compliance with the constitution and in effectuating its purpose, whatever that may include. It is customary for ordinances for municipal loans to embody many specifications of the securities which it is planned to issue, specifications not only of the interest rates, but of all such details as the denominations, division into classes, sinking fund arrangements, arrangements for application of rentals from leased improvements, and the like. There is no mortgage or other instrument to embody these specifications for a public loan, and the ordinance is used for the purpose, for fixing rights and duties in detail. It seems questionable whether it can reasonably be said that all of such a comprehensive ordinance is ever submitted to popular vote, or that the popular judgment or wish is taken on all these details and specifications. But assuming that the whole ordinance, with all that it contains, is submitted to vote, then it seems to me a mistake to say that any item included beyond the purpose and requirement of the Constitution can derive force and effect from any source greater than that which caused the insertion of the particular item. A referendum on the interest rate or on any other detail of the stock issue, if not required by the Constitution, could not upon any principle that I can think of have any standing or position beyond the control of the Legislature and the city government.

Therefore I take the question in the case to be, finally, one of the meaning or scope of the constitutional requirement that the "debt" be authorized and approved. Does it require authorization and approval of the particular interest rate as part of the authorization and approval of the debt, by act of assembly, ordinance and popular vote? I agree that if it does, then, after a specific rate has been authorized and approved, a new rate cannot be fixed except by the same triple authorization, and that the Act of 1927, ch. 155, and the ordinance in pursuance of it, which attempt to provide for the issue at a reduced rate of stock previously authorized at a higher rate, are invalid for want of approval by the popular vote. But I have not been able to agree that the Constitution does require authorization or approval of the interest rate.

The word "debt" alone, it seems to me, does not solve the problem. As commonly used it does not always and necessarily include the interest on the principal of an indebtedness. I believe it is common to speak of the principal only of a governmental indebtedness as the national, state or municipal debt. It is true that differences in interest to be paid on debts may make differences in the total obligation and burden to be borne ultimately by the taxpayers, but that total may also be affected in some degree by the prices at which the bonds or stock are put out, by sinking fund arrangements, arrangements for the application of rentals from leased improvements, and other incidents settled upon for loans, and I believe it will be agreed that the Constitution does not require all these incidents or details to be fixed in the approval of the debt; so the effect on the total ultimate obligation and burden of taxation would not alone justify construing the authorization and approval of debt in this clause to include approval of the particular interest rate.

This constitutional requirement was adopted at a time when nearly all the states in the country were placing restrictions upon the too easy incurring of municipal debts, and it seems to me there is significance in the fact that, in those jurisdictions in which the restriction is against exceeding specified limits of total debt, it has generally been held that, in applying the limitations, interest to accrue is not to be counted in as part of the debt. Dillon, Mun. Corp., sec. 205; 2 Abbott, Mun.Corp., sec. 160; 5 McQuillin, Mun. Corp., sec. 2224;Simonton, Mun. Bonds, secs. 51 and 57. This was settled by a decision of Justice Miller of the United States Supreme Court, sitting on circuit, in Durant v. Iowa County, 1 Woolw. 69, Fed. Cas. No. 4189, as early as 1864, three years before the adoption of the Maryland constitutional clause we are now construing. The restricting clause in those other states is not the same as the Maryland clause, but the general purpose is the same, and the conception of the debt restrained seems to me likely to have been the same. "The lawmakers were not looking at the incident of the indebtedness, but to the indebtedness proper." Ashland v.Culbertson, 103 Ky. 161, 164.

The choice of a particular rate of interest, a matter of seldom more than one per cent. one way or the other, seems to me comparatively so unimportant that it is not likely it would be made the subject of regulation or restraint under a constitutional clause, and still less likely does it seem that framers of the constitution would require that the choice he made as part of the authorization and approval in an act of assembly and an ordinance, and by a popular vote, all three. The framers knew that these three steps would take time, often a large part of a year, and that, as to stock to be issued in instalments, years might intervene before all stock authorized as they required would actually be put out; and they knew, too, that the rates at which securities could be marketed were, and always would be, unstable, variable, quantities. Variations such as those after the late European War, to which the city and the Legislature have attempted to make some adaptation in the present instance, were not things unheard of by the framers of the Constitution of 1867; on the contrary, within their experience, the interest rate was a much more unstable element than we now ordinarily conceive it to be. Within thirty years prior to 1867, there had been six financial panics or crises, and, within the thirteen years prior, four wars in Europe and the Civil War in America, all of which had their effects on the interest rate; and there were no arrangements of importance for stabilizing the rates then. This variable nature in the rate seems to me to argue against any intention on the part of the framers to have it fixed for an issue of municipal securities through the triple process prescribed for authorizing a debt, or to restrict the freedom of the municipality at all in arranging the rate. Again, I think the long continued practice of the Legislature to authorize a debt without specifying any rate of interest furnishes a strong argument against construing the Constitution to require it as any part of the authorization. It seems to me clear, to repeat, that if the particular rate of interest is required by the Constitution to be settled by popular vote, it must be settled also in the act of assembly and in the municipal ordinance, and, on the other hand, if it is not required to be settled in the act of assembly, it is not required to be settled in the ordinance or by the popular vote — not required by the Constitution, that is, for, of course, it must as a practical necessity be settled by some agency in order to prepare the securities. The requirement of the Constitution is single, that "the debt" shall be authorized by an Act of the General Assembly of Maryland, and by an ordinance of the Mayor and City Council of Baltimore, submitted to the legal voters, etc. One and the same thing is to be acted upon by all agencies alike, and I do not see any escape from the construction that whatever is included in the authorization or approval of the debt by any one must be included alike in the act of assembly, the ordinance and in the question voted on, and that if the Constitution requires that a particular rate of interest be voted on, or gives any effect to a vote on the rate binding the Legislature and the city government, then the Constitution equally requires that the act of assembly shall settle the particular rate in authorizing the debt. But certainly the legislative practice has been against that construction; the Legislature has not treated the interest rate as an integral part of the debt, to be settled in authorizing the debt under the Constitution. In only a few of the acts passed in compliance with the Constitution has any interest rate been specified. In by far the greater number, nearly forty, the selection of the rate has been referred entirely to the city itself. Illustrations of this are found in these acts: 1870, ch. 303; 1892, ch. 138; 1894, ch. 149; 1896, chs. 350 and 370; 1898, ch. 444; 1900, ch. 152; 1901, ch. 19; 1902, chs. 246 and 333; 1904, chs. 274, 338 and 468; 1906, ch. 728; 1912, ch. 27; 1914, ch. 722; 1916, ch. 585; 1920, chs. 373 and 374; 1922, ch. 379; 1924, ch. 222; 1927, chs. 154, 328, 332, 431, 470 and 471. In some of the acts authorizing smaller loans no reference at all has been made to interest; as to that element the particular acts of assembly have given no authorizations. The whole of the first act passed under the constitutional clause, Acts 1868, ch. 36, was: "Be it enacted by the General Assembly of Maryland, that the Mayor and City Council of Baltimore be, and they are hereby authorized, to issue from time to time, as they may deem proper, the bonds of said Mayor and City Council, payable at such time and for such sums as they may deem proper, not exceeding the sum of fifty thousand dollars in any one year, and in the whole not exceeding the sum of one hundred thousand dollars, for the improvement of the public parks of the said city, the authority now given being that required by the seventh section of article eleven of the Constitution of this State, to enable the said Mayor and City Council to make appropriation at their discretion within the above limits for the purpose aforesaid." And an Act of 1882, ch. 61, enacted no more than, "That the Mayor and City Council of Baltimore be and they are hereby authorized and empowered to pass the necessary ordinances and to issue the bonds of said city to an amount not exceeding two hundred thousand dollars for the extension of Patterson Park." See Acts 1874, ch. 477; 1878, ch. 265; 1904, ch. 444. The acts passed in 1924 and 1927 to authorize loans by the city, twelve in number, provided for interest "at such rate or rates as may be provided by or under the authority of said ordinance," thus not even directing that the rates be specified in the ordinance or question submitted to vote. The earlier of these acts were passed at a time when the purpose of the constitutional clause was still well known, apparently no question of their constitutional sufficiency ever arose, and they seem to furnish cogent arguments against an intention to require that a particular rate of interest be fixed in fixing the amount of debt authorized. "We allude to this legislation," said this court in Baltimore v.State, 15 Md. 376, 457, "as evidence of contemporaneous construction, and acquiescence by the people, and the various departments of the government, in such practical interpretation. For the effect of such continued practice, see Burgess v. Pue, 2 Gill, 11; State v. Mayhew, 2 Gill, 487; * * * See alsoBradford v. Jones, 1 Md. 351, that the Constitution may receive an interpretation from a long, constant, and uniform legislative practice. * * * Is it not as important that the interpretation of the fundamental law should be as uniform and certain as that of legislative enactments? In both the intent of the authors is the point to be arrived at, and the same rules and means of ascertaining it may be resorted to. If such considerations do not establish the right of the Legislature * * *, they are well calculated to raise very serious doubts on the subject, in which state of the judicial mind the law must be left to operate, until changed by the proper branch of government." Catholic Cathedralv. Manning, 72 Md. 116, 130; Levin v. Hewes, 118 Md. 624, 641, The court may obtain from any authentic source its information on such practice for aid in construction. 2 Sutherland on StatutoryConstruction (2nd ed.), secs. 471 to 473. Sedgwick, Interp. Construction Statutory and Constitutional Law (2nd ed.), pp. 215 to 217. Smith, Comm. on Statutory and ConstitutionalConstruction, secs. 622 to 623.

A legislative construction particularly apposite to the consideration of the Act of 1927, now questioned, seems to me to be found in a provision in an act of 1880 (chapter 94), that stock already authorized but not yet actually issued, or stock thereafter created and authorized by law, might be negotiated at a reduced rate whenever it might appear to the city practicable and advisable to do so. That act was apparently one of the measures adopted to take advantage of the lowering of rates of interest in that more settled period. Under Acts of 1861-1862, ch. 83; 1866, ch. 38, and 1868, ch. 467, "Baltimore Water Stock" had been issued at six per cent., with a right of redemption reserved. An Act of 1876 (chapter 237) provided for the issue of redemption stock at a reduced rate, not to exceed five per cent., with a clause for payment by the city of taxes on the stock. The Act of 1880, ch. 94, followed with an amendment of the clause on payment of taxes, limiting it to loans at not more than five per cent., and to that was added a proviso "that nothing herein contained shall prevent the said Mayor and City Council from negotiating said loans or any part thereof, already authorized by law, but not yet actually issued, or which may be hereafter created and authorized by law, at a lower rate of interest than five per cent. per annum, whenever it may appear to the said Mayor and City Council practicable and advisable to do so." And the purpose of this proviso, like that of the Act of 1927, now in question, seems clearly enough to be to sanction actual negotiation at reduced rates of interest of loans previously authorized under the constitutional clause. The passing nature of this sanction in the Act of 1880 suggests that there may have been a practice already in existence of negotiating at reduced rates unissued portions of stock previously authorized, and a brief reference to the early ordinances for illustrations shows at least one instance in an ordinance approved June 30th, 1877, number 65, section 4, which, after providing for the issue of five per cent. stock to redeem the old six per cent. Baltimore Water stock, provided further that the department of finance might in its discretion negotiate on the same terms unissued stock previously authorized by law.

Upon these arguments, then, it appears to me that we cannot say that the Act of 1927, ch. 155, and the ordinance in pursuance of it, are in clear conflict with the Constitution and therefore invalid.

The fact that in Stanley v. Baltimore, 146 Md. 277, a case on the effect of a statutory designation of the rate of interest for a municipal loan, the court took the rate to be an integral part of the debt authorized, seems to me to present no obstacle to carrying out the conclusion argued for here if it is correct. My view is that the expressions in that case should be given no further effect than was needed for the decision of the case then in hand, and that if they are too broad, without some qualification or restriction, to be confined to the construction and application of the statute there under consideration, the qualification and restriction should be made now. It is inevitable that courts should be under the necessity of doing this at times, and this court has not hesitated to do it when needed. See Owens v. Sprigg, 2 Md. 457, 478; Patterson v.Gelston, 23 Md. 432, 445. In the case of Carlson v. Helena,39 Mont. 82, 101, often cited on questions of municipal debts, a somewhat similar qualification of broad statements in a previous decision was made.

My conclusion has, for these reasons, been that the decree appealed from should be affirmed.