U.S. Supreme Court
Mobile v. Watson, 116 U.S. 289 (1886)
Mobile v. Watson
Argued December 10-11, 1885
Decided January 4, 1886
116 U.S. 289
When a municipal corporation with fixed boundaries is dissolved by law and a new corporation is created by the legislature for the same general purposes, but with new boundaries embracing less territory but containing substantially the same population, the great mass of the taxable property, and the corporate property of the old corporation which passes without consideration and for the same uses, the debts of the old corporation fall upon the new corporation as its legal successor, and powers of taxation to pay them, which it had at the time of their creation and which entered into the contracts, also survive and pass into the new corporation.
The object of the first of these suits was the recovery of a judgment for money, and of the second the enforcement, by the writ of mandamus, of the judgment recovered in the first. They were argued as one case. In the first case, Henry Watson, the defendant in error, was the plaintiff in the circuit court. He brought his action against the Port of Mobile to recover the principal money due on certain bonds issued by the City of Mobile, under its corporate name, "The Mayor, Aldermen, and Common Council of the City of Mobile," and the chanroblesvirtualawlibrary
interest on the same shown to be due by certain coupons thereto appended. The bonds were issued December 31, 1859, were for $1,000 each, and were payable to the order of the Mobile & Great Northern Railroad Company on the first day of January, 1879, with interest at the rate of eight percent per annum. Upon the margin of each bond was the following recital:
"In pursuance of the terms of the contract between the corporate authorities of the City of Mobile and the Mobile and Great Northern Railroad Company, an ordinance approved on the 30th December instant provides for the sum of $95,000 by a special tax annually to be applied to the payment of $1,000,000 of bonds to be issued by the City of Mobile to aid in the construction of the Mobile and Great Northern Railroad."
The declaration averred that the defendant, the Port of Mobile, was
"the legal successor of the said the Mayor, Aldermen, and Common Council of the City of Mobile, and bounden for its debts and for the payment of the said bonds and coupons."
The defendant pleaded
"That the said alleged bonds and coupons were issued by the Mayor, Aldermen, and Common Council of the City of Mobile, a different municipal corporation, and not by this defendant, nor by anyone authorized to bind this defendant in the premises; that this defendant is not the successor in law nor in fact of the said the Mayor, Aldermen, and Common Council of the City of Mobile, nor is this defendant legally bounden to pay the said debt."
In the record there was a paper entitled "Agreement of Facts," signed by the counsel for the parties. By this paper it was admitted that the contract between the City of Mobile and the Mobile and Great Northern Railroad Company, recited in the margin of the bonds, had been made, and the ordinance therein referred to had been passed, and that the plaintiff became the legal holder of the bonds and coupons, for value, before maturity, by the assignment of the railroad company. It was further agreed that two acts were passed by the Legislature of Alabama on the 11th day of February, A.D. 1879, one entitled
"An act to vacate and annul the charter and dissolve
the corporation of the City of Mobile, and to provide for the application of the assets thereof in discharge of the debts of said corporation,"
and the other, "An act to incorporate the Port of Mobile, and to provide for the government thereof." Said acts were referred to and made part of the agreement. It was further agreed that all the territory now embraced in the Port of Mobile was formerly embraced in the City of Mobile; that the territorial extent of the City of Mobile was about seventeen square miles, and of the Port of Mobile about eight square miles; that the Port of Mobile covered all the thickly settled and closely built portion of the City of Mobile; that the taxable property within the latter, according to the last assessment made by it prior to the passage of the Acts of February 11, 1879, was $16,255,093, and that all of said taxable property was embraced within the limits of the Port of Mobile, except about $900,000, and that about fourteen-fifteenths of the resident inhabitants of the City of Mobile were resident inhabitants of the Port of Mobile. It was further admitted that the total indebtedness of the City of Mobile on February 11, 1879, was about $2,500,000, and that it had nominal assets of $775,000, which were largely reduced for the general creditor by prior liens and exemption from levy by execution.
It appeared by the record that the case was submitted to the jury on June 29, 1880, which on that day returned a general verdict for the plaintiff and assessed his damages at $7,308.80, upon which the court at once rendered judgment in his favor. A writ of error sued out by the Port of Mobile brings this judgment under review.
The only question raised upon the trial was whether, as matter of law, upon the statutes of the State of Alabama, the Port of Mobile was the legal successor of the City of Mobile, and bound for the payment of the bonds and coupons sued on. The validity of the judgment in the case of The Port of Mobile, Plaintiff in Error v. Watson will therefore depend upon the answer to that question.
The plaintiff having obtained his judgment against the Port of Mobile, sued out, May 27, 1881, execution thereon which on the same day was returned by the marshal "No property chanroblesvirtualawlibrary
found." Afterwards, on the 19th day of January, 1882, he filed in the circuit court his petition, in which he prayed for the writ of mandamus and charged that the Police Board of the Port of Mobile had the right, and it was their duty, to assess and levy a special tax for the satisfaction of his judgment. He therefore prayed for the writ to compel the Port of Mobile, and its officers charged with the levying and collection of taxes, to assess, levy, and collect a special tax for the payment of his judgment.
In order to understand the questions raised by this petition, it will be necessary to state more fully the contract made by the City of Mobile with the Mobile and Great Northern Railroad Company in reference to the issue of the series of bonds in question and the legislation of the State of Alabama in reference to the City of Mobile and the Port of Mobile.
By the act of the legislature approved February 29, 1859, the City of Mobile was authorized to aid the construction of the railroad of said company by an issue to the company of bonds of the city to the amount of $1,000,000 under such contract as the city might make with the railroad company, and was vested with power to adopt the ordinances necessary to carry out such contract. In pursuance of this authority, the City of Mobile, on December 30, 1859, entered into a contract with the railroad company in which, among other things, it was provided that the city should issue to the railroad company, on or before January 2, 1860, its bonds to the amount of $1,000,000, and that the city should annually, after January 1, 1860, provide the sum of $9 or before January 2, 1860, its bonds to the amount of $1,000,000, and that the city should annually, after January 1, 1860, provide the sum of $9 or before January 2, 1860, its bonds to the amount of $1,000,000, and that the city should annually, after January 1, 1860, provide the sum of $95,000 to be applied to the payment of the bonds and coupons thereto attached as they became due by a special tax to be levied and collected by the city for that purpose, and that the city should pass the bylaws and ordinances necessary to that end. In pursuance of this contract, the City of Mobile, on December 30, 1859, passed an ordinance which provided that for the year 1860 and annually thereafter, there should be levied and collected a special tax upon the assessed value of all the taxable property in the City of Mobile sufficient to produce the said sum of $95,000, and that the money so raised should be pledged to the payment of said bonds and the interest coupons. chanroblesvirtualawlibrary
Upon the faith of the act of the legislature referred to and the contract and ordinance of the City of Mobile, bonds of the city to the amount of a million dollars were issued to the railroad company, and by it assigned and sold.
The City of Mobile having, in the year 1878, made default in the payment of the interest on its debt, which then exceeded $2,500,000, the legislature, on February 11, 1879, passed
"An act to vacate and annual the charter and dissolve the corporation of the City of Mobile, and to provide for the application of the assets thereof in discharge of the debts of said corporation."
This act, by its first section, repealed the charter of the City of Mobile and declared that the corporation of the City of Mobile, known as "The Mayor, Aldermen, and Common Council of the City of Mobile," was thereby dissolved and abolished.
The act then provided for the appointment by the governor of the state of three commissioners whose duty it should be to take possession of all the property and assets of the City of Mobile, to hold such property and assets upon the same trusts and subject to the same liens and charges that the same were under when in the possession of the City of Mobile, and, under the direction and pursuant to the orders of the Chancery Court of the County of Mobile, collect the debts and taxes due the city and sell its property and apply the taxes and debts collected, and the proceeds of the property sold, to the payment of the debts of the city, the floating debt to be first paid. The act declared that the commissioners should have no power to levy any tax or assessment whatever, but that it should be their duty to treat with the holders of the funded debt of the City of Mobile with a view to its adjustment and settlement and to report to the governor the result of their negotiations, together with the draft of such act as might be proper to carry into effect any scheme of adjustment that might result from such negotiations, all of which it was made the duty of the governor to submit to the legislature.
On the same day, to-wit, February 11, 1879, the legislature passed "An act to incorporate the Port of Mobile, and provide for the government thereof." chanroblesvirtualawlibrary
This act incorporated, under the name of "The Port of Mobile," the inhabitants residing within certain specified boundaries, which included no territory not embraced within the limits prescribed by the charter of the City of Mobile. The act provided for the election of eight persons, to be styled the "Mobile Police Board," for a tax collector, and other officers, and made it the duty of the tax collector to collect all taxes and license charges, and to perform and discharge all such other duties as might be required of him by the police board. It empowered the police board to levy and collect, for each year of its existence, upon the assessed value of all property and subjects of state taxation within the Port of Mobile a tax of six-tenths of one percent for the purpose of defraying the expenses of carrying out the provisions of the act, and made the assessment returned by the Assessor of Mobile county for the preceding year that on which the tax should be levied and collected. The act further provided that the police board should have and exercise the powers thereby conferred on them and no other, and repealed all conflicting acts and parts of acts.
After the recovery by the plaintiff of his judgment against the Port of Mobile on June 29, 1880, the Legislature of Alabama, on December 8, 1880 passed an act which declared that the police board should not levy any other tax than the six-tenths of one mill on the dollar authorized by the seventeenth section of the Act of February 11, 1879, "to incorporate the Port of Mobile and provide for the government thereof," and the license taxes authorized by § 30 of that act.
The legislature on December 8, 1880, also passed "An act to adopt and carry into effect the plans for the adjustment and settlement of the existing indebtedness of the late corporation," the City of Mobile, etc. This act was subsequently, on February 24, 1881, reenacted with material amendments.
The amended act provided for an issue of $2,500,000 of the bonds of the City of Mobile, to be dated January 1, 1881, and to be payable in twenty-five years, with interest at three percent for five years, four percent for fifteen years, and five percent for the remaining five years. These bonds were chanroblesvirtualawlibrary
to be used by exchanging them for the bonds of the City of Mobile of the issue of May 1, 1875, but no available provision was made in the act for the payment or satisfaction of the issue of which the plaintiff's bonds formed a part. The act further required the Commissioners of the City of Mobile, immediately after its passage, to turn over to the police board of the Port of Mobile "all the real and personal property which was formerly held and owned" by the City of Mobile "for public use and governmental purposes," such as public buildings, markets, squares, parks, fire engines, engine houses, hose and hose carriages, engineering instruments, and all other property of like character and use, except only the wharves.
Such was the legislation of Alabama in reference to the City of Mobile and the Port of Mobile when the plaintiff filed his petition for the writ of mandamus. The defendants to the petition -- namely, the Port of Mobile and the police board of the Port of Mobile -- filed a demurrer and also an answer to the petition. In the latter, they denied that the Port of Mobile was the successor of the City of Mobile, bounden for its debts and the performance of its duties in reference to said judgment, and denied that the Port of Mobile or its police board had any power or that it was their legal duty to assess, levy, or collect the special tax for the purpose of paying said judgment.
The plaintiff demurred to this answer and, upon final hearing upon the demurrer to the petition and the demurrer to the answer, the circuit court ordered
"That the respondents, the Port of Mobile, the Mobile Police Board, Richard B. Owen, President, James W. Monette, Robert Adams, Sylvester J. Russell, Daniel McNeill, Patrick J. Hanlon, John Henry, Frank P. Andrews, and William Paton, Commissioners of the Port of Mobile, and members of said police board, do forthwith assess, levy, and cause to be collected a special tax upon the property, real and personal, subject to tax by them, the said Port of Mobile and Mobile Police Board sufficient to pay and satisfy the said judgment of the relator against the Port of Mobile for the debts of the said relator, with interest thereon, and the same cause to be collected in lawful money,
and, as collected, in whole or in part, the same to pay over or cause to be paid over to said Henry Watson or his lawful attorney to satisfy the said judgment, with interest thereon."
This judgment is also brought up for review by the writ of error sued out by the Port of Mobile. chanroblesvirtualawlibrary