New Orleans v. Fisher

Background

Mrs. Fisher and her husband recovered judgments for teachers’ salaries in state court, and the judgments were later enforced in federal court as payable out of school taxes levied before 1879. On May 11, 1896, Mrs. Fisher (joined by her husband) filed a creditor’s bill asking the city to account for school taxes and interest the city had collected but not paid to the school board. The city admitted the judgments but denied that the collected taxes were a trust fund, denied liability for interest, and pleaded the ten-year statute of limitations. A master reported amounts collected and interest, and the parties disputed the master’s conclusions.

Reasoning

The Court held that the city held the collected school taxes as a trust for the school board and its creditors, so those creditors could ask a court of equity to reach the fund. The earlier federal judgment resolved citizenship objections, and the ten-year limitation did not bar this bill because the judgments were rendered within that period. The Court agreed that interest on delinquent school taxes was a penalty that belonged to the school fund, not to the city, and that the city, acting as trustee, could not appropriate that interest. Because there was no charge of wilful conversion and no prior demand shown, the Court limited interest to begin from the dates when the bill was filed or the master’s report was made.

Real world impact

The ruling requires the city to account for and pay over school taxes and related interest to the school fund and the creditors entitled to them. Teachers and others owed from those taxes can use equity to compel an accounting. The Court modified the lower-court decree to award interest from May 11, 1896 on $71,189.60 and from May 8, 1897 on $799.18, and remanded for the decree to be amended accordingly.