Milner's Administrator vs. The City of Pensacola.

to the legislature of Florida, would be to charge it with an attempt to perpetrate a most unconscionable and barefaced fraud.

I do not believe that the legislature of Florida had any such purpose, or that its legislation, fairly construed, can have any such result. A construction of the law which sustains such a purpose ought to be avoided, if it can be fairly and reasonably done, consistently with the terms of the act.

A careful reading of the acts of 1868 and 1869 shows that the purpose of those acts was not to destroy the municipal corporations already existing in the state, but to carry out the requirement of the constitution by establishing a uniform system of municipal government in the state, and to rehabilitate the existing municipal bodies with new and uniform privileges and powers.

The language of section thirty of both the acts carries this idea: "All the powers and privileges conferred in and by this act may be exercised by any city or town within the limits of this state heretofore incorporated." Had the section stopped here, there could be no pretense that its effect was to create new corporate entities. But it proceeds to declare that "it shall be lawful for any previously incorporated city or town to reorganïze their municipal government under the provisions thereof, by a voluntary surrender of their charters and privileges, and by an organization under this act."

This clause provides for the "reorganization," not the destruction, of municipal corporations. It does not provide for a new corporate entity. If it did, it would follow that every time a city or town received a new charter, it became a new corporate body, which is not the case. Colchester v. Seaber, 3 Burr., 1866. The language of the section thus far seems to recognize the continued and unbroken life of the cities and towns reorganized under the act.

The last clause of the section which, upon a failure of an incorporated town or city to accept the provisions of the act within nine months, repeals the acts vesting such city or town with corporate powers, does not necessarily destroy the corporate existence of such city or town.

Dillon, in his learned work on municipal corporations, says

Milner's Administrator vs. The City of Pensacola.

(vol. 1, sec. 116): "Where the functions of an old corporation are suspended, or where the corporation by loss of all its members, or of an integral part, is dissolved as to certain purposes, it may be revived by a new charter, and the rights of the old corporation granted over to the same or a new set of corporators, who in such case take all the rights and are subject to all the liabilities of the old corporation of which it is but a continuation."

The text is sustained by the citation of the following, among other authorities: Rex v. Passmore, 3 Term, 119, 247; Regina v. Bewdley, 1 P. Wms., 207; Colchester v. Brooke, 7 Q. B., 383.

My construction of the latter part of section 30 is, that it provided merely for a suspension of the powers of the municipal corporations failing to reorganize under the act, and not for a dissolution of the corporation itself.

As soon therefore as the city of Pensacola organized under the first six sections of the act, it was simply the assumption by the city of the new powers and privileges which the act conferred, and was not the creation of a new corporation.

That it was not the purpose of the legislature to give the effect to the act of 1869, claimed by defendant, is apparent from the enactment of the legislature of Florida, approved February 3, 1870, entitled "an act relating to cities," and copied at large in the statement of the case.

I am of opinion, therefore, that the failure of the city to reorganize under the act of 1869, within nine months after its passage, did not put an end to the corporate existence of the city of Pensacola, and that its subsequent reorganization under the first six sections of the act did not create a new, but was merely the rehabilitation of an old corporate body.

But conceding that the effect of the acts of August 6, 1868, and February 4, 1869, and of the failure of the city of Pensacola to reorganize under the latter act, was what the defendant claims, and that it was the purpose of the legislature to accomplish that result, the question remains, Was it competent for the legislature to destroy a municipal corporation, or to put it in its power to destroy itself, so as to cancel and wipe out its debts and liabilities?

Milner's Administrator vs. The City of Pensacola.

It was held by Judge STORY, in Mumma v. Potomac Company, 8 Pet., 281, that a private corporation might be dissolved by the legislature, or by judicial sentence, and that such dissolution did not impair the obligation of a contract any more than the death of an individual impairs the obligation of his contract. He placed this view on two grounds: (1) Because the obligation survives and the creditors may enforce their claims against any property belonging to the corporation; and (2) Because every creditor is presumed to contract with reference to the possibility of the dissolution of the corporate body.

The case is different with a municipal corporation. The main, and in most cases the only source from which creditors of a municipal corporation can expect to receive payment of their claims is found in the power of taxation. The dissolution of the corporation of course puts an end to its power of taxation, and renders the collection of debts owing by it an impossibility.

Now, in the case of these bonds, the act which authorized the indebtedness for which they were issued also provided for the levy of a tax to pay the indebtedness.

That provision for taxation was as much a part of the contract between the city of Pensacola and the bondholder as if it had been inserted in the body of the bond. A repeal of the tax provision would have impaired the obligation of the contract, and would have been a violation of the constitution of the United States.

In the case of Von Hoffman v. Quincy, 4 Wall., 535, the result of the decision of the court was, that when a statute authorized a municipal corporation to issue bonds and to exercise the power of local taxation to pay them, and persons have bought and paid value for bonds issued accordingly, the power of taxation thus given is a contract within the meaning of the constitution, and cannot be withdrawn until the contract is satisfied.

The state and the corporation in such cases are equally bound. See, also, Butz v. Muscatine, 8 Wall., 583; Welch v. St. Genevieve, 1 Dill., 134; Lansing v. County Treasurer, id., 522.

If the legislature cannot take from a municipal corporation the power of taxation conferred contemporaneously with the power to borrow money, and for the purpose of repaying the money

VOL. II. - 41

Milner's Administrator vs. The City of Pensacola.

borrowed, it would seem to follow a fortiori that it could not utterly destroy the municipal corporation which had issued bonds on the faith of a law authorizing taxation to pay them; thus, not only repealing the power of taxation, but leaving no corporate entity in existence against which suit might be brought.

How the obligation of a contract, made by a municipal corporation for the payment of money, could be more effectually impaired, it is difficult to conceive.

Upon this question, Dillon, in his work on Municipal Corporations, vol. 1, sec. 114, says: "As respects creditors of a municipal corporation, their rights are protected from legislative invasion by the constitution of the United States, and no repeal of a charter of a municipal corporation can so dissolve it as to impair the obligation of the contract, or, it may probably be safely added, preclude the creditor from recovering his debt."

In support of this view the learned author cites the following authorities: Cooley Con. Lim., 290, 292; Curran v. Arkansas, 15 How., 312; Thompson v. Lee County, 3 Wall., 327; Havemeyer v. Iowa County, id., 294; 2 Kent, 307, note; County Commissioners v. Cox, 6 Ind., 403; Coulter v. Robertson, 24 Miss., 278; Soutter v. Madison, 15 Wis., 30; Blake v. Railroad Co., 39 N. H., 435.

My conclusion is, therefore, that no legislation of the state of Florida could so destroy the city of Pensacola as to relieve it from the obligation to pay the bonds issued by it; that the present city of Pensacola is the same corporate body as that by which the bonds were issued, reorganized and clothed with a new charter, and with new powers and privileges, it is true, but still the same municipal corporation, and liable to pay the bonds and coupons in controversy in this suit.

Any other conclusion would produce the most monstrous results.

It would put it in the power of every city and town in Florida to cancel all its indebtedness incurred prior to February 4, 1869, amounting to many hundred thousand dollars, and to set their creditors at defiance. It would enable every city which receives a new charter to repudiate all indebtedness contracted under its

The Pensacola Telegraph Company vs. The Western Union Telegraph Company.

old one, and leave the holders of its bonds utterly without remedy.

In my judgment, neither of the defenses set up by the special pleas is good in law.

The demurrer to the pleas must, therefore, be sustained.

THE PENSACOLA TELEGRAPH COMPANY VS. THE WESTERN UNION TELEGRAPH COMPANY.

1. The section of an act of a state legislature which purported to give the exclusive right to a telegraph company, incorporated by it, to erect and use lines of telegraph within certain counties of the state, is in conflict with the act of congress approved July 22, 1866, entitled "an act to aid in the construction of telegraph lines, and to secure to the government the use of the same for postal, military and other purposes;" and the section conferring such exclusive right is therefore null and void.

2. Congress has the constitutional power to pass an act giving to telegraph companies, organized under state laws, the right to construct and use lines of telegraph along any of the military or post roads of the United States.

This was a cause in equity which was submitted on the pleadings and evidence for final decree.

Messrs. Chas. W. Jones, R. L. Campbell, and G. A. Stanley, for complainant.

Messrs. C. C. Yonge and E. A. Maxwell, for defendant.

WOODS, Circuit Judge. The bill avers in substance that on the 11th day of December, 1866, the legislature of the state of Florida passed an act by which it made the complainant company a body corporate, and conferred upon said company the sole and exclusive right and privilege of establishing and maintaining lines of electric telegraph in the counties of Escambia and Santa Rosa. That in pursuance of authority conferred by its act of incorporation, the said company had erected a line of telegraph along the right of way of the Alabama & Florida Railroad Company, within the county of Escambia, from Pensacola to the Alabama line, a distance of forty-seven miles.