Louisiana Ex Rel. Hubert v. Mayor and Council of New Orleans

Background

A receiver for the old Metropolitan Police Board sued the city of New Orleans to collect a judgment for unpaid obligations incurred between 1869 and 1877. The receiver claimed the city had levied and collected taxes meant for the police board but failed to pay them over. State courts found against the receiver, relying in part on an 1870 state law that limited direct enforcement and required judgments to be registered with the city controller before payment.

Reasoning

The Supreme Court examined whether later state laws could defeat the creditors’ right to have taxes raised to satisfy debts that existed when the taxing power was in force. The Court explained that when a municipal taxing power is the means by which creditors can be paid, that power is part of the obligation supporting their contracts. Laws that effectively remove or indefinitely postpone the ability to use that taxing power impair the contracts. Because the city had collected taxes intended for the police board and then failed to pay them, the Court held the receiver is entitled to compel the city to pay over the funds or to levy and collect a tax to satisfy the judgment.

Real world impact

The decision reverses the state-court denial of relief and requires further proceedings consistent with ordering the city to make payment or to raise a tax for that purpose. Creditors who relied on municipal tax-based remedies for payment retain the right to enforce those remedies despite later state statutes attempting to limit enforcement.