I dissent from the conclusion announced in the opinion of Mr. Justice Watts in this case, being of opinion that the prayer for injunction should be granted.
The petitioner seeks to enjoin the issue of certain certificates of indebtedness claimed to be authorized under the Act of March 14, 1925 (34 St. at Large, page 659), and an ordinance of the City Council of Charleston passed June 9, 1925.
It appears that there are on the books of the City Council *Page 199 past-due and unpaid taxes, duly levied upon property in the City, for the years 1921, 1922, 1923, and 1924, amounting to $327,994.62 as follows:
1921 ..........................................$ 33,173.93
1922 .......................................... 40,410.61
1923 .......................................... 83,128.65
1924 .......................................... 171,281.43
___________
Total ......................................$327,994.62
The Act of 1925 purports to authorize the City Council to issue certificates evidencing the amount of said unpaid taxes and to guarantee the payment of the indebtedness evidenced thereby, with interest, the unpaid taxes when collected to be applied to the retirement of the certificates. The Act also provides for the levy of a sufficient tax to supplement said collection if needed to retire the certificates as they may mature with interest.
The ordinance adopted in pursuance of the Act authorized the provisions of the Act. Let the Act and ordinance be incorporated in the report of the case.
It is conceded that, unless the authority to issue the certificates can be sustained under the Act of 1925, the issue will exceed the constitutional limit upon the bonded indebtedness of the City, under Article 8, § 7, of the Constitution, of 8 per centum of the assessed value of the taxable property in the City. In my opinion there are serious objections to the validity of the Act of 1925.
In the return of the City Council to the rule to show cause why the injunction prayed for should not be granted it is alleged:
"That during the years 1921, 1922, 1923, and 1924, it issued its certificates of indebtedness in the shape of notes in anticipation of the collection of taxes for amounts actually contained or to be contained in the taxes for the year when certificates were issued and were payable out of such taxes"; *Page 200 — and that a part of these are still outstanding, represented by renewal notes drawing interest. It is assumed that these notes were given under authority of what is now Section 4554, Vol. 3, Code 1922:
"That in the anticipation of the collection of taxes in any fiscal year said City or Town Council, whether such city or town be chartered by special Act of the General Assembly or under the general law, may from time to time, as occasion may require, borrow money for corporate purposes on its note or notes, and pledge the taxes levied or to be levied, in said year for corporate purposes, for the payment of such note or notes and the discount or interest thereon. * * *"
In the Act of 1925 no provision whatever is made for the holders of these notes, and, for all that appears to the contrary, the City Council may dispose of the authorized certificates and leave outstanding the notes which are, under the statute above quoted, secured by the unpaid taxes. Doubtless it is the purpose of the City Council to take up these outstanding notes with the certificates, but, if they do, they throw into a general pot the unpaid taxes, which stand severally as security for the loan of the particular year, and how these equities could be adjusted does not appear in the Act or in the argument of counsel for the City Council.
The most serious objection to the Act of 1925 is that the only method of borrowing money, so as to relieve the indebtedness of the excess limitation provided for in Article 8, § 7, is to come within the exception in that Section:
"Provided, That this Section shall not be construed to prevent the issuing of certificates of indebtedness in anticipation of the collection of taxes for amounts actually contained or to be contained in the taxes for the year when such certificates are issued and payable out of such taxes."
The essential elements of this procedure are: (1) The certificates must be issued in anticipation of the collection of the taxes, which necessarily means before the taxes may *Page 201 be due; (2) they must be issued at some time in the year in which the taxes are collectible; (3) they must be payable alone out of the taxes against which they may be issued.
Not one of these elements is supplied by the Act of 1925. The proposed certificates are to be issued long after the taxes have become due. The basis of the issue is that the taxes of the four years are past due and unpaid. They are proposed to be issued in 1925, not within the year in which they are collectible. It is proposed to make them a debt of the city, with the unpaid taxes as collateral, a more stringent obligation than that contemplated by the Constitution, "payable out of such taxes." The privilege extended by the proviso is to issue certificates whose only vitality is recourse to the pledged taxes. In other words, the purchaser must take them and look only to the taxes pledged for reimbursement, not to the general credit of the city.
Under Section 1122, Volume 3, Code of 1922, relating to notes by County authorities in anticipation of the collection of taxes, and Section 4554, relating to notes by municipal authorities for the same purpose, where no question arises as to exceeding the constitutional limitation, I have no doubt but that the obligation would be a valid one against the County or City, with the pledge of the taxes as collateral, but, where the obligation is not limited to the taxes collected, but is made a debt, the amount of the obligation must be counted in determining the question of excess indebtedness under the Constitution.
I may say that, in my opinion, the proposed proceeding is of exceedingly doubtful expediency No reason is assigned why the unpaid taxes for these four years have not been collected. Every instrumentality of collection is within the power of the City Council if the taxes are collectible, and to postpone that collection, which the proceeding will inevitably encourage, will continue a somnolence which has resulted in arrears of $325,000.00. *Page 202
For these reasons I think that the injunction asked for should be granted.
MR. CHIEF JUSTICE GARY and MESSRS. BONHAM, TOWNSEND, and MANN, Circuit Judges, concur.