State v. City of Lakeland , 112 Fla. 200 ( 1933 )

I concur fully in the major premises of the reasoning employed in the able opinion of Mr. Justice BUFORD, to the effect (1) that the Legislature cannot constitutionally pass any statute which impairs the obligation of an existing contract, or (2) which takes away or substantially impairs the only effective remedy for its enforcement; or (3) which denies to any person the equal protection of the laws; or (4) which divests, in whole or in part, the constitutional jurisdiction of this Court and the circuit courts to grant the full scope of that relief which was recognized as inherent in the common law writ of mandamus at the time our constitution was adopted. 12 C. J. 825-6. To my mind, the judiciary of this State would be recreant to its high trust if it departed from these principles; at least so long as they remain as they are today, expressly or impliedly an integral part of our Constitution. But I cannot concur fully in all that is said in some portions of the opinion, by way of deduction from such premises.

The Act here under attack is unique in that it is attempted to make it purely retroactive in its effect on contracts, expressly providing that it shall not apply to obligations of governmental units issued subsequent to the passage of the Act. It seeks to compel the courts to issue only a certain kind of peremptory writ of mandamus, in any case where the holder of past due bonds or interest coupons is seeking to compel payment thereof from money actually on hand in the interest and sinking fund, and then proceeds to impliedly command the courts not to issue that kind of a writ if the bonds involved are issued after the passage of the Act. Not only is this such an arbitrary classification as probably amounts to a denial of the equal protection of the laws, but it arbitrarily invades that broad discretion with which the courts are constitutionally vested in exercising the judicial power in withholding or granting and administering relief under the common law writ of mandamus; and that, too, without making any express change in the substantive law as to the rights or duties of the governmental units or their officers. Under the common law writ of mandamus, the courts can compel a public officer or members of a governmental board to perform their lawful ministerial duties when the relator shows a clear legal right to such performance. If the lawful duty of the officer is left unchanged, the Legislature cannot divest the courts of their jurisdiction to compel the performance of such duty at the suit of one who shows a clear legal right to such performance, for that jurisdiction is vested in the courts by the Constitution. This Act does not expressly attempt to change the substantive law as to the duties of governmental units or their officers, or the character or status of the funds in the hands of such governmental units; it is levelled solely at the only remedy by which performance can be secured, mandamus, the full common law scope and character of which is vested in the Supreme and Circuit Courts by the Constitution, and is therefore not subject to impairment by legislative action.

It has been suggested by counsel that, taking the Act as a whole, the court might imply therefrom an intent to change the substantive law. Let us examine the Act with this suggestion in mind. The body of the Act, Section 1, is quoted in the majority opinion. The title of the Act sets out the substance of that section. What might be called the preamble of the Act, preceding Section 1, reads as follows:

"Whereas in many taxing districts of this State, a large percentage of past due bonds and other obligations are in default because of large amount of delinquent taxes, yet such taxing districts are forced by mandamus suits to pay some of such past due obligations in full, to the extent of moneys on hand in the interest and sinking fund, thus exhausting the fund and leaving nothing for other creditors having obligations of equal dignity and lien:

"And whereas, such procedure constitutes an unfair preference of one creditor over another, and no creditor should be entitled to enforce payment of more than a pro rata share of moneys on hand in the interest and sinking fund, Therefore:

"Be it enacted by the Legislature of the State of Florida:"

Then follows the body of the Act, the substance of which is contained in Section 1.

If this preamble could be construed to make the Act impliedly state a rule of substantive law, while such rule might be invalid if applied to most cases, it might possibly be constitutionally applied (as a mere statutory reiteration of already existing law) to a limited field, — a certain class of cases, — involving taxing districts and governmental units, which are, to all practical intents and purposes, insolvent, and the funds on hand are in the nature of a closed fund, or a fund which the facts of the case show is not in fact replenishable by the exercise of the taxing power to such an extent as to enable the taxing unit to meet its obligations as they mature, or within a reasonable time thereafter. Our cases, in which the rule of "first come, first served," has been applied, have been based upon the principle that even though the fund on hand was not sufficient to pay all matured bonds or interest coupons, it appeared that such fund was an accrual from, and replenishable by, the exercise of "an inexhaustible taxing power" which would enable the debtor to ultimately pay in full all who may have claims against the fund as a whole. But in cases where the facts show that, in so far as the possibility of the exercise of the taxing power not only tolevy, but to actually collect and produce, the requisite funds is concerned, the theory of an "inexhaustible taxing power" is a fiction and not a fact, and that to grant the writ would result in paying the suing bondholder in full, leaving the other bondholders where they would in all probability be paid either nothing at all, or a very small proportion of their bonds or interest coupons, at some unknown or remote future period, the theory or principle of "first come, first served," above alluded to, would not be applicable. This is what I understand the law to have been when the bonds were issued, and what I understand it to be today, entirely independent of this statute, even if it could be construed as respondents contend. If the statute should be construed as taking away or impairing a right, or an essential remedy of enforcement, which existed when the bonds were issued, it would be unconstitutional. If it be construed as being capable of being given a limited application in such cases as are above alluded to, it would as thus construed and applied be merely declaratory of existing law, as I understand it, and its enactment was unnecessary.

This Court has, in the recent and yet unpublished case of Moran, et al., v. State, handed down July 11, 1933, recognized an exception to the "first come, first served" rule. In the opinion written by Mr. Justice TERRELL in that case, referring to the cases cited in State ex rel. Gillespie v. Carlton,103 Fla. 810, 138 So.2d 612, it was said:

"In some of these cases the rule was recognized that when a fund was such that various and sundry creditors were compelled to rely on it as the only source from which their claims could be paid and that such fund was insufficient to pay all in full, and none being preferred, then equity would require that the fund be distributed pro rata." Citing Voorhies v. Mayor of Houston, 70 Tex. 331, 7 S.W. 679. The opinion also says that: "Drainage Districts organized under the general drainage law are not clothed with power to levy and collect taxes without limit to meet debts and other obligations incurred by them. Such tax levies are restricted to the amount of benefits shown by the plan of reclamation and when this amount is reached the power to tax is cut off. (Sec. 1114 Rev. Gen. Stats., 1467 Com. Gen. Laws.) They therefore cannot be classified with municipalities and other taxing units having an inexhaustible taxing power, on which the rule above announced was predicated."

The equity doctrine referred to in this case just quoted from is set forth and discussed in Sections 405-407 of Pomeroy's Equity Juris. (4th ed.). In this discussion Pomeroy says: "In other words, if the fund is not sufficient to discharge all claims upon it in full, or if the debtor is insolvent, equity will incline to regard all the demands as standing upon an equal footing, and will decree a pro rata distribution of payment."

In the opinion of Mr. Justice TERRELL in the case above referred to, he observes that drainage districts organized under the general law are not clothed with the power "to levy and collect taxes without limit." Neither are municipalities, or other taxing units, clothed with the power to "collect" taxes without limit, although they may levy ever so high, or without limit. We might take judicial notice of the fact that many municipalities have found that there is a limit to the tax-paying power of their people, and that when assessments and levies are made so heavy as to be insupportable, the total amount collected is much less than when the assessments and levies were lower and more reasonable. Thus, there is a limit to the tax-collecting power of municipalities. The economic law of diminishing returns works out its inexorable results. And this law of economics cannot be repealed by the Legislature or the courts. So the term "inexhaustible taxing power" is not synonymous with "inexhaustible tax-collecting power." And the power to levy taxes is of little avail when it is so vigorously used as to exceed and impair the power to collect. All that the bondholder has the real right to demand is that, if necessary to pay his bonds, the debtor taxing unit shall be compelled to so exercise the taxing power as to produce the maximum of cash returns. If, when this is done, the fund on hand and the funds which may reasonably be expected to be raised by taxation within a reasonable time in the future, are and will be insufficient to pay within any reasonable time all having a claim against such funds in full, and the taxing unit is, in effect, insolvent, not being able to meet its current obligations as they fall due, then the equitable principle above discussed would become applicable, and hence a pro rata distribution of the fund on hand should in such cases be made, thus equally protecting all those who have claims against the fund. This would not, under such circumstances, impair the contract obligations of the bondholders, but would prevent their impairment by preventing full payment to some at the expense of others. The cases of Keefe v. Adams, 106 Fla. 733,143 So.2d 644, and State ex rel. Montgomery v. City of Ft. Pierce, 106 Fla. 845, 143 So.2d 733, come very near to being predicated upon the principle that the fund derived from taxes levied and collected for a particular purpose are imposed with a trust, and the taxing unit holding the fund thus created holds it as a trustee for that particular purpose, and cannot divert it to other purposes. We have also cited in several of our decisions the case of City of Austin v. Cahill, 99 Tex. 172 [99 Tex. 172], 88 S.W. Rep. 542. In that case it was held that it was not necessary for all the city's bond holders to be before the court, because the city stood in the position of trustee for all its bondholders, and that they were constructively present through their trustee, the city.

In Duncan Townsite Co. v. Lane, 245 U.S. 308, 62 Law Ed. 309,38 Sup. Ct. Rep. 99, the Federal Supreme Court said: "Mandamus is an extraordinary remedial process, which is awarded, not as a matter of right, but in the exercise of a sound judicial discretion. It issues to remedy a wrong, not to promote one; to compel the performance of a duty which ought to be performed, not to direct an act which will work a public or private mischief, or will be within the strict letter of the law, but in disregard of its spirit. Although classed as a legal remedy, its issuance is largely controlled by equitable principles." This case was cited with approval in the recent case of United States v. Dern, advanced sheets of 77 Law Ed. 790.

If the allowance of the writ of mandamus is controlled by equitable principles, the writ should not be allowed when to grant it would be to give a preference under such circumstances as under equitable principles would be denied. See, in this general connection, Pittsburgh Steel Co. v. Baltimore Equitable Society, 226 U.S. 455, 57 L.Ed. 297, 33 Sup. Ct. Rep. 167; Note to case of Douglas v. Loftus, (Kan.) L.R.A. 1915-B, 797, 806,et seq.; State ex rel. Gillespie v. Thursby, 104 Fla. 103,139 So.2d 372; State ex rel. East Side Bank v. Holloway, 105 Fla. 616, 142 So.2d 221; Morris, Mather Co. v. Port of Astoria,141 Or. 215, 15 Pac. Rep. 2d 385; Dillon on Munic. Corp. (5th ed.) Sec. 893; 10 R. C. L. 381; 38 C. J. 546-550; 21 C. J., subject, "Equity," Sec. 207; Anniston Loan Trust Co. v. Ward,108 Ala. 85, 18 So.2d 937; Portland Sav. Bank v. City of Montesano, 14 Wn. 570, 45 Pac. Rep. 158; City of Cleveland, Tenn. v. United States, 111 Fed. Rep. 341; State ex rel. Burr v. Tavares G. R. Co., 78 Fla. 329, 82 So.2d Rep. 833; Board of Liquidation of New Orleans v. U.S., 118 U.S. 136, 30 Law Ed. 65; Henley v. Myers, 215 U.S. 373,54 L.Ed. 240.

I concur in the order made in the majority opinion, that the motion to strike the alternative writ be denied. This leaves the matter open for the respondents to show by their answer, if they can, such a state of facts as would bring into play the equitable principle hereinabove alluded to.

I think it makes very little difference in this case whether Senate Bill No. 63 is unconstitutional or not, or whether or not it could be constitutionally applied to the limited class of cases to which I have referred, because, as I see it, if this limited application of the statute could be made, it would to that extent be merely declaratory of already existing law, as I understand it. Mere fictions or theories of "inexhaustible taxing power" should not deter the court from applying well settled principles of law to the actual facts — the realities — of the particular case. It is merely a case of new applications of old principles, in the light of the real facts, without compromising or departing in the slightest degree from the constitution, or sound, well settled principles of law.