Kraus v. Philadelphia

Opinion by

Mr. Justice Simpson,

Because of the magnitude of the interests involved and the pressing need for a speedy decision, we consented, at the request of all the parties, to assume original jurisdiction in this case, and to permit the plaintiff to file a taxpayer’s bill against the City of Philadelphia, its mayor, solicitor, controller and treasurer, to enjoin all further proceedings on certain ordinances hereinafter specified. The bill was thereupon filed, certain additional facts agreed upon, and defendants demurred. At the oral argument we were requested by both sides to speed the cause, and to render final decision one way or the other, without granting leave to amend or plead over.

The important facts are as follows: By two ordinances passed and approved April 12, 1916, the city expressed a desire to increase its indebtedness in the sums of $67,-100,000 and $47,425,000, respectively, for purposes which were, so far as the first ordinance is concerned, entirely capital outlay, as defined in the Act of June 25, 1919, hereinafter referred to; but as to the second ordinance, part was for capital outlay and part for current expenses as defined in the act. Both ordinances also provide for obtaining the consent of the electors by a vote to be thereafter taken. The electors having given consent, councils by two later ordinances, passed and ap*429proved June 29, 1916, authorized “the Mayor, City Controller and City Solicitor, or any two of them......to borrow at such times and in such proportions as, in their judgment, the best-interests of the city demand,” the total amount of said loans for the purposes specified in said ordinances. Under the authority thus given part of the loan authorized by each ordinance has been borrowed, and part not.

On July 11, 1919, the mayor approved an ordinance duly passed, authorizing “the Mayor, City Controller and City Solicitor, or any two of them......to borrow at such times and in such proportions, as in their judgment the best interests of the city demand,” the further sum of $12,970,000 for purposes some of which are and some of which are not capital outlay as defined in said act. Under this last ordinance, after due advertisement, the city undertook on August 6,1919, to sell $2,000,000 of its bonds to certain bankers, but the loan had not been consummated when the bill in this case was filed. Article XVII, Section 8, of the Act of 1919, is quoted in the bill, and interpreted as meaning that no further debt can be incurred except for capital outlay as defined in this statute, and not even then unless upon the certificate of the city controller, given “prior to the authorization of such debt.” Plaintiff further averred the city proposed to continue borrowing the balance of the sums specified in said ordinances, whether for capital outlay or not, and this without obtaining the certificate of the city controller, which had never been given as to any of said loans. Wherefore plaintiff alleged no further proceedings could legally be had in regard to said loans, and prayed an injunction thereagainst.

Defendants demurred on a number of grounds, which in their argument they condensed into two propositions: (1) Is said article XVII, section 8, prospective or retrospective? and (2) Is it constitutional? In our consideration of the case we shall also treat the matter substantially under these two heads, but prefer to state the *430first a little differently, viz: What effect has article XVII, section 8, upon the ordinances referred to, so far as this new legislation relates to those parts of the loans which have not actually been made? If we keep in mind, what was said in Phila. v. Fox, 64 Pa. 169, and Com. v. Moir, 199 Pa. 534, that a municipality is “merely an agency instituted by the sovereign for the purpose of carrying out in detail the objects of government, and therefore......the legislature......may enlarge or diminish its territorial extent or its functions, may change or modify its internal arrangement or destroy its very existence” at will, and apply the time-honored rule that in construing a statute we must consider the old law, the mischief and the remedy — the questions for consideration under the first head will not be found as difficult as the elaborate arguments of counsel would indicate.

Article XVII, section 8, is as follows: “It shall be lawful for such city to borrow money or incur debt, in accordance with the terms of existing law, for the purpose of acquiring property, erecting buildings, bridges, or other structures (but not for the repair of the same), paving streets (but not repaving or repairing the same), or for any other permanent improvements or capital outlay of any kind, provided that all of such proposed expenditures are certified to the council by the city controller to be capital expenditures as distinguished from current expenses, prior to the authorization of such debt. The certificate of the city controller shall be final and conclusive as to the character of the proposed expenditures. It shall be unlawful for the city to borrow money or incur debt for any purposes other than above specified, except in the case of loans for periods not to exceed one year as provided in this act: Provided, however, That if during the preceding year current funds have been used for which'it would have been lawful to borrow money as herein provided, and the city controller shall so certify, the current funds may be reimbursed out of loan funds borrowed for that purpose.”

*431The primary question naturally arising is: Can the city, after the effective date of this provision, viz: after July 25,1919, borrow money for any purposes other than capital outlay as defined therein? Evidently the evil which the legislature desired to remedy was the habit of borrowing money to pay current expenses, instead of paying them out of the annual taxes, thereby overburdening future years, which will always have their own current expenses to pay, and possibly rendering the city incapable of making future loans for capital expenditures, even if needed to insure the health and safety of its citizens. The evil being great and the purpose to remedy it clear, our duty in construing this provision of the act is equally clear. Happily on this question no room is left for antagonistic construction. The section says: “It shall be unlawful for the city to borrow money or incur debt for any other purposes than above specified,” that is, for capital outlay as therein defined. This clause has no relation to “authorization of such debt” or to “the certificate of the city controller.” It is a plain, simple inhibition against thereafter borrowing money for current expenses; and hence no ordinance previously passed, which authorized the city officials to borrow in the future, can have any further validity as to loans for current expenses, if they were not actually consummated before this provision of the act went into effect. The sovereign having taken away this much of the power previously given to its agent, the latter must thereafter act strictly within the authority remaining in it.

The next question naturally arising under our. present heading is: Where the proposed indebtedness is for capital expenditures, at what stage of the proceedings must the certificate of the city controller be obtained? In determining this, construction is required, but the answer seems clear. The section provides: “It shall be lawful for said city to borrow money or incur debt.....for the purpose of......capital outlay of any kind, provided that all such proposed expenditures are certified to the coun*432cil by the city controller to be capital expenditures as distinguished from current expenses, prior to the authorization of such debt.” The phrase “authorization of such debt” as therein used, if standing alone, might refer to its authorization by a vote of the electors in cases where such consent is required, since the words are sometimes used in that sense in other portions of the act. It is plain, however, they were not so used in the section under immediate consideration, for, if they were, no certificate would be required for the authorization of a loan not necessary to be submitted to a vote of the electors, whereas it is palpable the legislative intent was to require it in every kind of loan. Moreover, it is only the character of the “proposed expenditures” which is to be certified, and what these will be cannot be known until the passage of the ordinance authorizing the city to “borrow money” for the “proposed expenditures.” Even where the consent of the people is required the money may never be borrowed, though that consent has been given. Instances are not rare in which this .has been the case.

The reason for requiring the certificate of the city controller and making it conclusive leads to the same result. If it had been intended simply to forbid expenditures other than for capital outlay, a simple statement to that effect is all that would have been required. Doubts, however, might arise, and, as “capital is timid,” loans might be difficult to place and the premium obtained small or none. To prevent these results the act prescribes that the certificate of the city controller shall be conclusive that the “proposed expenditures” are for capital outlay; and hence it will be in ample time if given “prior to the authorization of such debt” by the ordinance empowering the city officials to actually make the loan. It has been suggested that, possibly, the purpose of the certificate was to advise the electors whether or not they were voting for an increase of indebtedness for capital outlay. The electors are given that information, however, both in the advertisement of the election and on the ballot *433itself, and it is improbable tbe legislature would have required further advice to them. It follows that tbe certificate of tbe controller is required prior only to tbe ordinance authorizing tbe city officials to actually borrow tbe money; and tbe two ordinances of April 12, 1916, expressing a desire to increase the indebtedness and providing for obtaining tbe consent of tbe people, and tbe vote of tbe people consenting thereto, not being within tbe mischief sought to be remedied by tbe Act of 1919, are not affected thereby.

Tbe final question under our first bead is: Where, as here, tbe city officials, by ordinance duly passed and approved prior to tbe effective date of tbe relevant section of tbe Act of 1919, were authorized to make tbe loans now under consideration, but bad not in fact actually made them, are those ordinances avoided even as to proposed capital outlay, because tbe certificate of tbe city controller was not obtained “prior to tbe authorization of such debt”? This is tbe most difficult question in tbe case. It is evident tbe legislature appreciated that difficulty would be experienced in applying tbe radical departure from previous methods which it ordained in tbe section under consideration, and hence postponed tbe effective date thereof to one month after tbe approval of tbe act. Did tbe legislature intend to postpone tbe effective date still further in cases where tbe debt bad previously been authorized? If such bad been its intention it could bave easily said so by a provision that tbe section should not apply to cases where tbe increase of debt bad been already authorized; but it did not say so. It is evident, too, tbe legislature must bave recognized tbe difficulty which would arise in cases where an ordinance authorizing tbe borrowing of tbe money, included current as well as capital expenditures, as do tbe present ordinances regarding tbe $47,425,000 and $12,970,000 loans. In such cases a proposed lender would not know whether be was lending bis money for a lawful or an unlawful purpose; and hence would not lend at all, unless tbe *434borrowing was backed up by the conclusive certificate of the city controller. That certificate was required to be issued, however, “prior to the authorization of such debt” by the ordinance empowering the city officials to borrow. To render effective, therefore, the purpose intended to be accomplished, we must hold that all ordinances authorizing the city officials to borrow which were not backed by the certificate of the city controller, became unavailing after the effective date of the provision of the act we are considering, so far as the loans authorized thereby had not theretofore been actually made; and, since the legislature made no distinction in this regard between loans for capital expenditures, loans for current expenses and loans partially for each, this conclusion must be held applicable to ordinances relating to all classes of loans.

The conclusion just stated is enforced by the language of section 8 itself, which says: “It shall be lawful for the city to borrow money or incur debt......for capital outlay of any kind, provided that all such proposed expenditures are certified by the city controller to be capital expenditures as distinguished from current expenses, prior to the authorization of such debt.” This is a grant of power to be exercised in the future, that is, after the effective date of the section; and after that time the authority to “borrow money” for “capital outlay,” is conditioned on compliance with the express provision that the certificate of the city controller be obtained. The prior acts giving power to borrow without that condition are expressly repealed by article XXIII of the Act of 1919.

It is true that pending proceedings not fully consummated would normally fall with the repeal of the laws under which they were begun; but this result is not brought to pass where, as here, those laws are substantially reenacted by the repealing act itself. In such cases the proceedings may be continued and concluded under the new law, subject, of course, to such modifications as it provides. That the Act of 1919 is in this regard a sub*435stantial reenactment of prior laws thereby repealed, save in so far as concerns the requirement of a certificate of the city controller and the provision regarding the illegality of loans to pay current expenses, is evident from a comparison of the Act of April 20,1874, P. L. 65, and its supplements, with the similar provisions of the Act of 1919.

In effect the section of the Act of 1919 which we are considering makes it lawful to borrow money provided the certificate of the controller is obtained, and unlawful if it is not. This results from the use of the word “provided.” Hence, since the section refers to the actual borrowing of the money, the attempt to borrow the $2,-000,000 after July 25, 1919, was unlawful because such attempt had not the certificate of the controller at its back, and so also, for the same reason, would any further efforts to borrow under the ordinances of June 29, 1916, and July 11, 1919, so long as the matter remains as it now is. Inasmuch, however, as the ordinances so far as they express a desire to borrow money for capital expenditures, and the vote of the electors granting consent thereto, are not antagonistic to the underlying purposes of the section under consideration, councils may from time to time, by supplementary ordinances, authorize the city officials to borrow money in accordance with the desire so expressed, providing “prior to the authorization of such debt” the city controller in each instance certifies that the purposes expressed in the new ordinance are capital outlay as defined by the Act of 1919.

For the general principles involved it is sufficient to refer, without elaboration, to The Hickory Tree Road, 48 Pa. 139; Haspel v. O’Brien, 218 Pa. 146; 26 Am. & Eng. Ency. of Law (2d Ed.) 758; 36 Cyc. 1084; and 25 Ruling Case Law 934.

The final question for our consideration is: Is Article XVII, Section 8, of the Act of 1919, unconstitutional? The objections to it do not seem to us to carry any weight. The statement in the November 5, 1918, amendment of *436Article IX, Section 8, of the Constitution, that “In incurring indebtedness for any purpose the City of Philadelphia may issue its obligations maturing not later than fifty years from the date thereof,” means no more than that the municipality may do so for any lawful purpose, though not named in the amendment. The unthinkable conclusion from defendants’ contention is that the city is authorized thereby to borrow for private as well as public purposes. Nor does the section offend against article III, section 7, regarding local and special laws. Since all three amendments of Article IX, Section 8, of the Constitution put Philadelphia in a class by itself so far as relates to increasing its debt, it cannot be unconstitutional to legislate separately for the city upon that subject : Rymer v. Luzerne County, 142 Pa. 108. Nor does the requirement of a certificate by the city controller infringe article III, section 20, which provides: “The General Assembly shall not delegate to any special commission, private corporation or association, any power to make, supervise or interfere with any municipal improvement, money, property or effects, whether held in trust or otherwise, or to levy taxes or perform any municipal function whatever.” Certainly an individual cannot be a “private corporation or association,” and in order to be a “special commission” there would have to be delegated to him some of the duties thereof, yet here there is not even a suggestion of such delegation. Nor does the section impair the obligation of contracts. One cannot impair the obligation of a contract by forbidding its being made except upon specified conditions. We have not been advised that there are any contracts between the city and its contractors, by which the former agreed the latter should be paid out of loans to be created under the provisions of existing ordinances, and hence we are not called upon to decide how the Act of 1919 would be construed in its effect upon such a contract. No other constitutional provision has been brought to our atten*437tion, and we know of none, which said section might infringe; it is therefore held to be constitutional.

It follows that plaintiff is entitled to relief to the extent hereinbefore indicated. Since, however, it is highly improbable that the councils or officials of the city, present or future, will endeavor to impose upon the municipality an indebtedness without full compliance with the requirements of the Act of 1919 as herein interpreted, and since, if they did, it is certain no lender could be found to accept bonds issued under such circumstances, a formal decree will not be entered, or injunction issued, at this time; but leave is given counsel to apply therefor whenever necessary. The City of Philadelphia is to pay the costs.