Berman v. Board of Education , 360 Ill. 535 ( 1935 )

It is my opinion that the legislation which we are considering could be, and ought to be, sustained; that the legislature had the power, under the constitution, to permit the issuance of bonds for the purpose intended; that the opposite result of this case would be for the direct financial welfare of approximately one-half the people of Illinois, and that the cases cited and reasons given for the judgment reached do not sustain it. I am therefore respectfully dissenting from the view of the majority and will briefly state my reasons.

It is first argued by counsel for the appellant that there was no obligation existing between the municipality and the holder of a tax warrant other than that of a trustee to see to it that the funds collected are applied to the payment of the outstanding warrants. They cite the cases of City ofSpringfield v. Edwards, 84 Ill. 626, People v. Nelson, 344 id. 46, and others, to the effect that tax anticipation warrants are not contracts and that the municipality is not indebted on account of having issued them. From this premise they argue that the act in question is unconstitutional because it authorizes the board of education to issue bonds to pay tax anticipation warrants, which are not obligations of the municipality. They say this amounts to the appropriation of money for a private and unlawful purpose rather than a proper corporate purpose; that it imposes upon the tax-payer who has paid his taxes an unjust burden; that it is lacking in uniformity as to other members of the community who have not paid their taxes, and that it amounts to double taxation as against the tax-payer who has paid, requiring him to pay twice for the same object. Reference is made to section 2 of article 2 of the constitution, which requires that taxes must be uniform in respect to persons and property. It is said that in this case the taxes levied and for which the tax anticipation warrants were issued designated the purposes for which the moneys collected would be used; that the appropriation ordinance and the levy ordinance, under which those taxes were levied, gave notice to the tax-payers that the moneys collected would be used for the purposes specified; that the holders of the tax anticipation warrants who advanced the moneys knew that their warrants would be redeemed by the moneys collected from the tax-payers for the purposes specified in the appropriation and levy ordinances. From this premise it is argued that the payment by any tax-payer of his taxes for the years represented by the anticipation warrants completely satisfied his obligation to the municipality and completely paid his pro rata part of the outstanding anticipation warrants; that when the appellant paid her taxes and satisfied her debt to the municipality she redeemed her share of the outstanding warrants and should not be taxed again in respect thereto.

It is further argued by the complainant that section 2 of article 2 of the constitution also prohibits a municipality from appropriating money for any but a corporate purpose; that this appropriation is not for a corporate purpose because of the fact that the tax anticipation warrant created no direct liability on the part of the school district, and the warrant on its face limits the holder to his claim to a particular fund, and limits his right to payment from that fund and nothing more. On this branch of the case appellant citesMidland Lumber Co. v. City of Dallas City, 276 Ill. 172, holding it not to be a corporate purpose for a city to pay for the construction of sidewalks when the construction cost thereof had been provided for by special assessments; City ofChicago v. Brede, 218 Ill. 528, where it was held that a city has no power to purchase special assessment bonds out of moneys derived from miscellaneous sources; Washingtonian Home v. Cityof Chicago, 157 Ill. 414, holding that the city of Chicago had no power to donate for private purposes revenues derived from licenses; Sleight v. People, 74 Ill. 47, holding that a tax imposed for the payment of a debt not incurred by the authority imposing the tax, and for the payment of which it is not liable, was not for a corporate purpose; Board of Supervisors v. Weider, 64 Ill. 427, to the same general effect as theSleight case; and Porter v. Loehr, 332 Ill. 353, invalidating a tax for the purpose of increasing the pension of a retired public employee.

The appellant also claims that the act violates section 9 of article 9 of the constitution, which requires that all municipal taxes must be uniform in respect to persons and property within the jurisdiction of the body imposing the tax, it being claimed that the act in question permits the imposition of a double burden for a single object, upon which branch of the case the appellant cites and relies upon City of Chicago v. Collins, 175 Ill. 445. The force and object of this citation are not perceived, as the only holding in that case pertaining to taxation was to the effect that a wheel tax of the city of Chicago imposed upon vehicles which had been specifically taxed as personal property amounted in that case to double taxation and was declared illegal.

That portion of appellant's argument which demonstrates that tax anticipation warrants are not debts and do not represent a direct legal obligation of the municipality issuing them must be conceded to be sound, and it is therefore necessary to inquire as to whether or not all the other contentions made by her necessarily follow from that premise. The real question for our decision, then, is this: Does the constitution prevent the legislature from authorizing its creature, the school district, to assume as a legal liability an outstanding moral obligation? The answer to this question determines the issues in this case, and I believe that answer is to be found by determining whether or not such an assumption of liability is for a corporate purpose.

Although its outlines are indistinct and its boundaries at times difficult of exact discernment, the field of corporate purpose is large. In Taylor v. Thompson, 42 Ill. 9, Justice Lawrence said, speaking for the court, that taxes are for a corporate or municipal purpose if the money is to be expended in a manner which shall particularly promote the general prosperity and welfare of the municipality levying them. InChicago, Danville and Vincennes Railroad Co. v. Smith, 62 Ill. 268, it was held that a township donation to a railroad, made under legislative authority and under sanction of a majority vote of the people, was a corporate purpose for which the township authorities could assess a tax. In that opinion we said: "It is contended that the appropriation was not for a 'corporate purpose.' If it was for a public purpose — for the benefit of the inhabitants of the municipality — then it would be for a corporate purpose. The latter cannot be distinguished from the former, and all that we have said in relation to the public purpose of the tax will apply with equal force to a corporate purpose." The court re-affirmed the statement of Judge Lawrence in Taylor v.Thompson, supra. To the same effect see, also, Henderson v.Lagow, 42 Ill. 360, and Misner v. Bullard, 43 id. 470.

As recently as the case of Hagler v. Small, 307 Ill. 460, in which we sustained the validity of a bond issue for the payment of bonuses to soldiers in the World War, in considering what constitutes a public or corporate purpose, we used the following language: "If the purpose be public it is so because it makes for the public weal. If such be the effect of it, the power to carry out such purpose does not rest on obligation to the individual but is found in the general welfare provision of the constitution, and is based upon the principle that the State is empowered to do that which it ought to do for the public good. Such purpose is not primarily concerned with the interest of the individual but with the welfare of the public as a whole." In his work on Constitutional Limitations Cooley states (Sec. 129) that taxes should be levied only for those purposes which properly constitute a public burden, but that what is for the public good and what are public purposes, and what does properly constitute a public burden, are questions which the legislature must decide upon its own judgment and in respect to which it is vested with a large discretion, which cannot be controlled by the courts, except, perhaps, where its action is clearly evasive, and where, under pretense of a lawful authority, it has assumed to exercise one that is unlawful. In the briefs, many cases are cited from other jurisdictions, and a reference to any standard set of annotated cases will disclose more than a hundred adjudicated cases passing upon the question, in general, of what is and what is not a public purpose. An examination of a large number of these cases indicates it to be the consensus of judicial opinion that such a purpose is not subject to exact definition. Without attempting such a definition, and for the purposes of this particular case, I feel that the prior decisions of our own court offer us sufficient guidance.

I am of the opinion that it is clearly a corporate purpose and in the interest of the welfare of the whole people to preserve the credit and future borrowing power of the school district in question. It is a matter of common knowledge, of which the court cannot pretend ignorance, that practically all of the municipal tax-imposing bodies of the State utilize tax anticipation warrants from time to time, most of them being entirely dependent on this source of funds during the latter part of each tax year. Even if the salutary principles of equity and common honesty were to be disregarded, the plainest and simplest considerations of policy should forbid impairment of this source of money if it can be avoided.

While it must be admitted, as contended by the appellant, that the district was not technically liable on the warrants as for a promise, yet it must also be admitted with equal candor that the district hired the use of the money, at an expense for interest, as a convenience to itself in its use and a detriment to the warrant holder who made the advance. It must also be admitted that but for such advancement during the recent economic crisis the schools could not have remained open. These elements, in my opinion, create not only a "moral obligation," but one which verges upon a legal liability so closely that the distinction can be found only in the strict letter of the instrument by which the use of the money was obtained. The situation of the district is analogous to that of a borrower who has secured his lender by some instrument which is so technically defective as to be unenforceable. Although he might be able to defeat payment by standing on his legal defenses, yet if he has due regard for sound morals, and even the slightest interest in maintaining his credit for future use, he will find some means to discharge the obligation. It is inconceivable to me that what an honest man who wishes to protect his personal credit would do for himself can not be done by a municipal corporation, when the legislature, which is the fountain of all its power, says that it may. The only perils to be perceived in such a procedure lie in its unrestrained multiplication, and this is effectually guarded against by the constitutional limitation upon the total indebtedness which may be incurred.

The cases of Midland Lumber Co. v. City of Dallas City,supra, City of Chicago v. Brede, supra, and the other cases above mentioned as being relied upon by appellant, are not in conflict with this conclusion on this question. The taxes imposed in those cases were without specific legislative authority, whereas the tax in this case is pursuant to a direct grant of power. Neither is this conclusion in any way in conflict with the constitutional prohibition which prevents the General Assembly from imposing taxes upon municipal corporations, or the inhabitants or property thereof, for corporate purposes. The tax in this case is not imposed by the General Assembly but by the local taxing bodies, pursuant to authority but not to any command of the General Assembly. Sections 9 and 10 of article 9 of the constitution were carefully considered by this court in Wetherell v. Devine,116 Ill. 631, and in that case we used the following language, referring to the previous decisions of this court and of the Supreme Court of the United States: "The decisions in these cases lay down three propositions as clearly deducible from the sections here quoted: First, the General Assembly cannot grant the right to assess and collect taxes to any other than the corporate authorities of the municipalities or districts to be taxed; second, taxation by such municipal or corporate authorities must be for corporate purposes; and third, such taxation cannot be imposed without the consent of the tax-payers to be affected." The legislation before us violates none of these principles.

The appellant's remaining contention is that this legislation constitutes double taxation, but the authorities fail to sustain such an argument. In 1 Cooley on Taxation, (4th ed.) sec. 223, we find the general rule in this respect stated in the following language: "Direct duplicate taxation, and by this is meant 'double taxation' in the strict legal sense of the term, means taxing twice for the same purpose, in the same year, some of the property in the territory in which the tax is laid, without taxing all of it a second time. * * * To constitute double taxation, objectionable or prohibited, the two or more taxes must be (i) imposed upon the same property; (2) by the same State or government; (3) during the same taxing period; and (4) for the same purpose." By whatever name it may be called, the purchasing of these outstanding tax warrants and the issuance of bonds in place of them amount to nothing more nor different than a refunding operation, and such operations have never been found objectionable as constituting double taxation, although it is quite obvious that in every case of refunding the same property will be again taxed for a purpose for which it had presumptively been taxed before. City ofQuincy v. Warfield, 25 Ill. 317; Kane v. City of Charleston, 161 id. 179; People v. Atchison, Topeka and Santa Fe RailwayCo. 356 id. 251.

In my opinion the legislature was within its constitutional limits and the decree below should be affirmed.