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MUELLER CERTIFICATE DECISION.
In a decision announced April 18, 1907, the Illinois Supreme court held that that part of the Mueller law relating to the issue of certificates by the city of Chicago for the purpose of buying the street railways was invalid. The essential portions of the decision follow:
This was a bill in chancery filed by Edwin L. Lobdell and others in the Circuit court of Cook county against the city of Chicago, Mayor Edward F. Dunne, Comptroller L. E. McGann and City Clerk Adrian C. Anson to enjoin the printing and issuing of $75,000,000 of street-railway certificates under the provisions of an act entitled, "An act to authorize cities to acquire, construct, own, operate and lease street railways, and to provide the means therefor," approved May 18, 1903; in force July 1, 1903.
This act is commonly called the Mueller law and was adopted by the city of Chicago at an election held on April 5, 1904, and two ordinances of the city of Chicago, bearing date respectively Jan. 18, 1906, and May 28, 1906, which ordinance bearing date of Jan. 18, 1906, was adopted by the votes of a majority of the electors of the said city at an election held on April 3, 1906.
The ordinance of May 28, 1906, was never submitted to the electors of said city for adoption. The defendants filed a general demurrer to said bill, which demurrer was sustained, and the complainants having elected to stand by their bill, the same was dismissed for want of equity, and they have prosecuted an appeal to this court to reverse the decpee of the Circuit court.
After quoting the provisions of the Mueller law ana giving in full the second section, which regulates the issue of street-railway certificates, the ccurt continues: The council ordinance of Jan. 18. 1906, as supplemented by the ordinance of May 28, 1906, makes provision for the printing and issuing of the street railway certificates of the city of Chicago to the amount of 875,000,000. Tbe ordinance of Jan. 18 contains blank forms of the street-railway certificates which are to be issued and the trust deed or mortgage which is to be executed to secure their payment.
Then the court quotes the modifications made in the certificates by the ordinance of May 28 and the wording of the mortgage which it is sought to spread on any street-car properties to be acquired by the sale of these certificates.
It is averred in the bill that the total assessed valuation of all the taxable property in said city of Chicago, as shown by the equalized assessment for state and county taxes for the year 1905, was the sum of $407,991,625, and that the then total indebtedness of the city was the sum of $20,298,985.86.
It is evident, therefore, that the city of Chicago had so nearly exhausted its debt-creating power under the constitution that if it Is held said streetrailway certificates are indebtedness of the city, within the limitations found in the constitution, the issue of said certificates would be in violation of. the constitution and void.
We think it self-evident, from a consideration of the statute and the ordinances under which the city of Chicago Is proposing to issue said $75,000,000 of street-railway certificates, and the terms of said street-railway certificates, and the trust deed or mortgage which is to be executed to secure their payment, that the object of the legislation, as evidenced by the Mueller law and said ordinances, and the contract relations with the certificate holders which the city proposes to assume by the issue of said certificates and the execution of said trust deed or mortgage. In view of the existing indebtedness of the city, when considered as a whole, Is an attempt to provide funds with which to municipalize the street railways of the city of Chicago without violating the provisions of section 12 of article 9 of the constitution of 1870. This Is to the effect that no county, city, township, school district or other municipal corporation shall be allowed to become Indebted in any manner or for any purpose to an amount, including Indebtedness, in the aggregate exceeding 5 per cent on tbe value of the taxable property therein, to be ascertained by the last assessment
for state and county taxes, previous to the incurring of such indebtedness.
The court quotes the cases of Law vs. people, 87 111. 385, page 396. and the city of Springfield vs. Edwards. 84 111. 626. page 632. In the latter case it was held:
"A debt payable in the future Is, obviously, no less a debt than if payable presently; and a debt
fayable upon a contingency, as upon the happenng of some event, such as the rendering of a service or the delivery of property, etc., is some kind of a debt, and therefore within the prohibition. If a contract Op undertaking contemplates, In any contingency, a liability to pay, when the contingency occurs the liability is absolute—the debt exists—and it differs from a present, unqualified promise to pay only in the manner by which the Indebtedness was incurred; and, since the purpose of the debt is expressly excluded from consideration, it can make no difference whether the debt be for necessary current expenses or for something else."
The doctrine of these cases has been frequently approved by this court. Howell vs. city of Peoria, 90 111., 104; Culbertson vs. city of Fulton, 127 Id.. 30; Prince vs. city of Quincy, 128 id., 443; city of Chicago vs. McDonald, 176 id., 104. And in this case there could be no reasonable ground for contention that the street-railway certificates which the statute provides may be issued with which to obtain funds fop the purchase or construction of street railways would, when issued and negotiated, not be the debts of the city issuing them, were it not for the provision found iu the statute, which provision has also, in substance, been incorporated in the ordinance of Jan. 18, and the certificates and trust deed, or mortgage, that such street-railway certificates shall "under no circumstances be or become an obligation or liability of the city, or payable out of any general fund thereof, but shall be payable solely out of a specified portion of the revenues or Income to be derived from the street-railway property for the acquisition of which they were issued."
It was, however, held in city of Jollet vs. Alexander, 194 III., 457, on page 462;
"It Is not essential that there should be a right of action on the certificates against the city In order to constitute a debt, where its money or property can he taken in payment. To the same effect is the holding in village of East Mollne vs. Pope. 224 III.. 386."
And, while it must be conceded that there is no liability resting upon the city to pav said streetrailway certificates, the question remains, Is not the property of the city pledged or mortgaged for the payment of such certificates in such manner as to make said certificates an indebtedness of the city witbin the constitutional prohibition?
"One who pawns or pledges his property and who will lose the property if he does not pay is Indebted, although the creditor has nothing but the security of the property; and so, also, is a mortgagor who Is liable to lose his property If he does not pay the money secured by the mortgage. (City of Jollet vs. Alexander, supra.)"
If all that Is proposed to be done in this case Is to pledge the property and its income which is purchased with the proceeds of said street-railway certificates when issued and sold to secure payment of said certificates, then, under the doctrine of Winston vs. Spokane. 41 Pac. Rep., 888, which has been approved in the city of Jollet vs. Alexander and in the village of East Mollne vs. Pope, supra, there would be no indebtedness, within the constitutional inhibition, created by the issue and sale of said street-railway certificates and the execution of said trust deed or mortgage, as against the city.
If, however, the property to be acquired with the fund obtained from the issue and sale of said street-railway certificates is all the property that Is to be pledged or mortgaged to secure the payment of the certificates, what will be purchased with that fund? Clearly, not the streets of the city of Chicago on which the street-car lines are to be laid, and upon which they will be operated, for the obvious reason that the title to these streets and the right to control them were vested In the city prior to the issue and sale of said Btreet-railway certificates:
It is clear that the funds derived from the issue and sale of said street-railway certificates will be Uted for equipment and construction, such as rails, cars, poles, wires, electric appliances, buildings, labor In laying of track, erecting buildings, etc, and we think it equally clear that a trust deed or mortgage covering only such equipment, when constructed, would afford full and adequate securi-' ty for the repayment of the fund received by the city from the sale of said street-railway certificates. This was well understood by the general assembly when it passed the Mueller law, and by the city of Chicago when it enacted the ordinance of Jan. 18, as by the Mueller law it was provided;
"In order to secure the payment of any such street railway certIflcatee and the interest thereon, the city may convey, by way of mortgage or deed of trust, any or nil the street-railway property acquired or to 'be acquired through the issue thereof, which mortgage or- deed of trust shall be executed in such manner as may be directed by the city council and acknowledged and recorded in the manner provided by law for the acknowledgment and recording of mortgages of real estate, and may contain such provisions of this act as may be deemed necessary to fully secure the payment of the street-railway certificates described therein. Any such mortgage or deed of trust may carry the grant of a privilege oi* right to maintain and operate the street-railway property covered thereby, for a period not exceeding twenty (20) years from and after the date such property may come into the possession of any person or corporation as the result of foreclosure proceedings; which privilege or right may fix the rates of fare which the person or corporation securing the same as the result of foreclosure proceedings shall be entitled to charge in the operation of said property for a period not exceeding twenty years.'*
And the trust deed provides, in case of default iu the payment of said certificates:
"There shall be a sale of all the property, both real and personal, and rights and franchises hereoy mortgaged, and then and In such event the title to all the property hereby mortgaged, both real and personal [exclusive of franchises and operating rights), shall vest In the purchaser at such foreclosure sale and the purchaser at such foreclosure sale in addition thereto shall have the right to construct, maintain and operate the said street railways, property, rights and franchises hereby mortgaged during the period of twenty years from and after- the date of such sale."
If the provision of the statute above quoted does not authorize the city to mortgage the right to operate street cars in the streets of the city, and if the trust deed or mortgage does not carry the right to use the streets of the city for street-car pt: rposes for a period of t wen ty yea rs from the date of foreclosure under said trust deed or mortgage to the purchaser at said foreclosure sale, then we are unable to understand the legal Import of the language found in the statute and the trust deed.
It is too clear for argument that, under the statute, the ordinance of Jan. 18, and the trust deed, the use of the streets for street-car purposes is to be mortgaged for the benefit of the holders of said street-car certificates for a period of twenty years after a sale shall be made if the trust deed or mortgage is foreclosed; and if the right to this use of the streets of the city is property, then the trust deed given to secure the payment of the $75,000,000 street-railway certificates proposed to be issued is something more than a purchase-money mortgage, and, within the doctrine of the Alexander and Pope cases, these certificates, when issued and sold, and the trust deed or mortgage given to secure them will create an indebtedness of the city within the constitutional prohibition.
In the Alexander ease the city of .Toilet had a waterworks system. It was indebted up to the constitutional limit, and in order to extend its waterworks system It sought by mortgage to pledge the income of the existing waterworks sys
tem and that of the extension, and It was held that the certificates thus sought to be secured created a debt within, the constitutional Inhibition.
In the other case the city • of East Moline was indebted to the full amount of 5 per cent of its assessed valuation, as provided in the constitution. It sought to Issue $35,000 In bonds with which to erect a waterworks system and to provide a tax levy of not more than 1 cent on the dollar annually on all property within the corporate limits of th-i village for a period of fifteen years, to be used in payment of said bonds. The court said (page 393):
"In the case at bar It Is manifest that if nothing hut the income from the waterworks was pledged or could be reached to satisfy the principal and interest of the bonds the case would be within the meaning of the language last quoted (the language of the Alexander ease), but here revenue of the village, to he obtained by general taxation-to the extent of 1 cent on the dollar of taxables, must be applied to the payment of this indebtedness If the income from the waterworks proves insufficient to satisfy it."
The law is well settled in this state that a city. has a property right in streets—that it usually holds the fee; and it has been held that the city may grant a freehold In its streets to a streetrailway company to enable it to operate its stx-eetcar lines thereon.
In support of this statement the court quotes from the opinions in the cases of the village of Harlem vs. Suburban Railroad company, 198 111., 337; the city of Chicago vs. Baer. 41 111., 306; the Cicero & Proviso Street Railway company vs. city of Chicago, 176 111., 501; Rich vs. the city of Chicago, 152 111., 18. and New Orleans, etc., Railroad company vs. Delaware, 114 U. S-, 501.
It is alleged in the bill that the city of Chicago has heretofore required as a condition precedent to granting licenses for the use of portions of its public streets for public utility corporations the payment of compensation, and that It is now receiving from such sources upward of the sum of $400,000 annually, and that upward of the sum of $100,000 thereof is received annually from surface railroads. It is held that the city of Chicago may grant a permanent and valuable right to a streetrailway company to operate its street railroads in its streets and that it may lawfully charge such railway compensation for such use. In Byrne vs. Chicago General Railway company, 16 111., 75. on page 81, the court said:
"It is too late to deny to the city the power to grant privileges to street-railway companies to lay down tracks and operate them In and along the streets of the city, or the power of such companies to agree with the city concerning the terms upon which they will accept such privileges. The city was not limited to a simple denial or granting of the privilege, but might prescribe the terms upon which the privilege should be conditioned if conferred; and by accepting the ordinances so burdened with the terms the railway company became bound to pay the license fee so long as it enjoys the privileges conferred by the ordinances."
It. would seem clear, therefore, that the city would, in issuing said street-railway certificates and In executing said trust deed or mortgage to secure the payment thereof, be doing more than giving to the holders of said street-railway certificates a purchase-money mortgage upon the prop erty acquired with the fund derived from the issue and sale of said certificates, as it is obvious the most valuable security which the certificate holder is to receive is the right granted by the trust deed to the purchaser at foreclosure sale to operate the street railways which he may acquire at said sale in the streets of the city for the period of twenty years from and after the date of his purchase.
Without that right the certificate holder would only have a lien on the rails in the streets and other equipment of the street railway, which would be of little value without the right to oierate said street railways in the streets of the city. Bv the trust deed or mortgage proposed to he executed by the city to secure the payment of said street-railway certificates, in case of its foreclosure and a sale under the foreclosure decree, the city would lose the right itself, or through its grantees or licensees, to use its streets for the period of twenty years from the date of the foreclosure sale for street-railway purposes and also the compensation which it receives as license fees or otherwise from the street-railway companies now occupying its streets with tlieir tracks, the surrender of which lights would entail upon the city not only the loss of the coutrol of its streets for street-railway purposes for twenty years, but would deprive it of many hundred thousands of dollars which would be paid into the treasury during that period by street railways as compensation £o<- the use of its streets upon which to operate their street-car lines.
It is claimed the principle involved in specialassessment cases should be applied to this case, and that the street-railway certificates proposed to be issued should be held, like special-assessment warrants, not to constitute an indebtedness of the city. In the Alexander case the same contention was made, and the holding was adverse to the present contention of the appellees. * * *
It is also urged that, even though the city may have a property right in its streets which it can transfer by ordinance to a street-railway company, which will yield to the city a revenue, it is said when the city grants to a street-railway company the right to occupy its streets it rests under no obligation to exact from the street-railway company compensation for the use of Its streets, but may grant such use to. the street-railway company as a gratuity, if it sees fit, and that a court of equity will not control the city in making such grant. (Roby vs. city of Chicago, 215 111-, 604.) In the case at bar, however, the city does not propose to grant the use of its streets as a gratuity, but to mortgage it for a period of twenty years to secure the payment of the street-railway certificates sought to be issued, and, as we have seen, the right which the certificate holder acquires through the trust deed or mortgage is a valuable right, and is upon property other than that which the money which he paid for the streetrailway certificates of the city purchased, whereby he has acquired a security upon more property than the money paid for the certificates has purchased. We do not think the reasoning in the Roby case applies to a case like this.
We have viewed the question here raised from all standpoints and have been forced to the conclusion if the Alexander and Pope cases are right on principle, as we think they are, that the trust deed or mortgage which the city of Chicago is authorized by the ordinances of Jan. 18 and May 28 to execute to secure said $75,000,000 in streetrailway certificates upon the right to operate street railways in the streets of said city for the
period of twenty years after the date of foreclosure sale under said trust deed or mortgage, is something more than a purchase-money mortgage: that the purchaser at a foreclosure sale of said trust deed or mortgage would secure nothing of value as a street railway unless he acquired the right to operate the street railway which he purchased in the streets of the city, and that such right in no way represents any part of the money derived from the issue and sale of said street-railway certificates, and that under the well-settled law of this state, as announced in the previous decisions of this court, the issue and sale of said certificates and the execution of said trust deed or mortgage would create an indebtedness of the city which, in view of its present indebtedness, is of such character as is in violation of section 12 of article 9 of the constitution, and renders the issue of said certificates illegal and unconstitutional.
This court has nothing to do with the policy of the municipalization of street railways in the cities of this state. It is its duty, however, to enforce the provision^ of the constitution as It find* them written in that instrument. Section 12 of article 9 of the constitution is a wise provision, and must be enforced and applied by the courts until its provisions are changed by the people in the manner provided in the constitution. In Dolese vs. Pierce, 124 111., 140, on page 149, It was Si.id: '"The highest duty and most sacred function of this court is to protect and enforce the constitution, regardless of all real or imaginary ii.conveniences that may result from doing so," and in village of Hyde Park vs. city of Chicago, 124 111., 156, on page 163, "The voice of the people is all powerful when expressed in pursuance of laws that are passed in obedience to the constitution. But until the 'people vote to amend or change the constitution in the mode which they themselves have designated, they, as well as their officials, are bound to obey its mandates."
The briefs filed in this case are voluminous and the arguments have taken a <wlde range. As the question considered by this opinion is controlling we have not deemed it necessary to consider herein any of the other questions which have been raised and discussed in the briefs.
Having reached the conclusion that the proposed issue of $75,000,000 in street-railway certificates of the city pf Chicago, and the execution of said trust deed or mortgage to secure their payment, will create an indebtedness of the city of Chicago beyond the constitutional limit, the decree of the Circuit court will be reversed and the cause remanded to that court, with directions to overrule the demurrer to the bill of complaint.
Reversed and remanded, with directions.
state and in general stands in the same relation to the state as congress does to all the states as a whole. The powers and duties of the chief executive officers are as follows:
Gpvernor—The governor is vested with the chief executive power of the state. He Is the commander In chief of the military and local forces and may call out the militia to maintain the peace. He is required to Inform the general assembly, by message, of the condition of affairs of the state and to recommend needed legislation. He may, by proclamation, call a special session of the assembly or adjourn It in case of disagreement between the two houses. He has the power to appoint certain officers and during a recess of the senate may fill vacancies or remove certain officers and may call special elections to fill vacancies In certain offices. He may make requisitions upon the governors of other states for the return of fugitives from justice or offer rewards for the arrest of offenders against the laws of the state. He exercises a general supervision over the penitentiaries and may grant reprieves, commutations and pardons and may restore the rights of citizenship to ex-convicts. He may approve acts of the legislature and exercise the veto power.
Lieutenant-Governor—This officer is ex-officlo president of the senate and has the power to cast the deciding vote in case of a tie. In case of the death, conviction on impeachment, failure to qualify, resignation, absence from the state or other disability on the part of the governor, the lieu
tenaut-governor succeeds to the office to the close of the term.
Secretary of State—The secretary of state is charged with the safekeeping of the original laws and resolutions of the general assembly; with all books, bills and documents deposited with him by either house, and with all bonds, records and papers filed la his office. He keeps a record of the official acts of the governor, furnishes certified copies of the same to the assembly on request and certified copies of any of the records of his office on the payment of the statutory fees. He countersigns and affixes the seal of the state to all proclamations and commissions issued by the governor; issues licenses for incorporations and certificates of organization to cities and villages and incorporated towns. He has charge of most of the buildings and grounds belonging to the state In Springfield, furnishes supplies for the general assembly and supervises the printing and distribution of all the public documents of the state. He calls the house of representatives to order at the beginning of each general assembly and presides over the same until the election of a speaker. He is the keeper of the great seal of the state and is the custodian and sealer of weights and measures.
Auditor—The auditor is required to keep all the accounts of the state; to audit the accounts of all officers or other persons authorized to receive moneys from the state treasury; to personally sign all warrants drawn on the treasury; to Institute suits wherein the state is a plaintiff, and to make a biennial report of the business of his office to the governor. With the governor and treasurer he determines the state tax rate. He exercises a general supervision over state banks, building, loan and homestead associations.
State Treasurer—The state treasurer Is custodian of the revenues and public moneys of the state. He must make monthly settlements with the auditor and a biennial report to the governor.
Superintendent of Public Instruction—The superintendent exercises a general supervision over all the public schools of the state. He is the general and legal adviser of the county superintendents and must report biennially to the governor the general condition of all the schools of the state, the amount raised by taxation for school purposes and the manner of its expenditure and the general condition of all the school funds. He may grant state certificates to teachers or cause them to be withheld and must visit charitable Institutions which are educational in character.
Attorney-General—It is the duty of the attorneygeneral to represent the state in the Supreme court in all cases in which the state Is interested; to act as counsel for all state officials; to be the legal adviser of the governor and other state officers In matters relating to their official duties, and, on request, to furnish them, as well as either branch of the general assembly, with written opinions upon constitutional or legal questions.