that no time or labor should be begrudged that tends to clear away its abuses and perfect its procedure.

Most of you have doubtless read Mr. Chamberlin's timely article in the North American Review for July on our opportunity in the race for commercial supremacy on the Pacific. It is but one of many thoughtful articles that have appeared recently to clear up our ideas of the size and wealth of the Orient and the almost unlimited possibilities for us in its trade and commerce.

But admiralty has value apart from its relation to commerce. The crying need of today is for economy of time and money in the administration of justice.

Business will not much longer consent to the tedious delays that shame justice in all important suits at common law and more and more as its virtues become known, the people will turn to admiralty procedure as the most practical.

It is speedy, it is preeminently equitable, it has always been and can be made to be progressive, and rightly administered it is much more economical than any other system. It is the only system that is cosmopolitan or that can ever become universal.

To lawyers it offers a simpler practice and better pay than any other procedure. It gives full scope to the powers of logic and oratory of the members of our profession. The skillful proctor who possesses the necessary dramatic and forensic ability can make his witnesses live and lie again as he recounts the evidence to the judge; and the mighty and beautiful phenomena of the sea are always ready at hand to furnish apt illusion and graceful illustration.

I believe gentlemen, the subject viewed in any light is of sufficient importance to this association, the State and the United States to justify some action being taken that whatever abuses in admiralty practice do exist may be brought to the attention of the proper tribunals and the necessary changes made. I hope the committee on reforms in legislation and procedure will take up this matter and put these hurried suggestions and others that may come to them in some permanent form, submit them to committees of other Bar Associations, and present them finally to Congress, or the Supreme Court of the United States, as may be deemed best.

LIMITATIONS ON MUNICIPAL INDEBTEDNESS

BY CHARLES E. SHEPARD, OF SEATTLE.

Limitations on municipal indebtedness are of two kinds: the first as to the consideration, cause or object of the debt; and the second, as to the total amount of the indebtedness, or of certain portions of it. The first class of limitations arises out of the fundamental principle of the law of corporations, that a corporation, unlike an individual, is restricted in its business activities, and in its capacities of buying, selling and trading. Such limitations hedge in every corporation, and what they are in detail depends on its general character and the terms of its charter. In the case of municipal corporations they are merely a special application of this familiar principle. However much we have departed from the stricter notions of past times, and however much the tendency of these latter days has been towards expenditures, purchases and business enterprises by cities for sanitary, philanthropic and socialistic purposes at which our grandfathers would have cried out, the principle stands unimpaired. Our point of view as to what is a proper municipal object for spending the citizens' taxraised money has shifted that is all.

Perhaps the most striking class of litigations in which the battle raged as to what is and what is not a proper object for a municipal promise to pay, was that arising out of the railroad aid bonds and like obligations in the middle western states. Its limits in time may be roughly stated at from about 1865 to 1880. The causes,

course and results each partly legal, partly political and partly economical of this remarkable episode in municipal history we cannot stop to discuss. In its purely legal aspect, the outcome was that while many courts held railroad aid bonds, whether based on stock-subscriptions or on donations, valid as municipal debts,

the people, after bitter experience and severe losses, took care by legislative or constitutional enactments to prohibit such debts in future; and such is now in many, perhaps in all, states a limitation on the capacity of municipalities to incur debt.

The other sense, however- that of limitation of the amount of indebtedness is the most usual one for the subject in hand; and to that we will confine ourselves. The railroad aid controversy contributed sharply to direct public attention during the "sixties" and "seventies" to the alarming growth of local public debts and of consequent taxation in the newer regions of the United States, which could least endure such burdens. Hence sprang up a movement limiting the amount of debt, even where the proposed debt was clearly legal in its purpose or consideration. This movement derived added force from the fact that the decisions of the courts in the railroad aid bond cases, especially where the bonds had gone into circulation as commercial paper, had left many cities and counties under enormous debts. The result was the adoption of constitutional prohibitions in many states against municipal debts in excess of a certain percentage of the taxable assets within the municipality. The earliest of these provisions was adopted about 1870; and every one of the newer and western states, with many of the older ones have since then put some similar limitation on the power to incur municipal debt.

It would be a tedious and profitless task on this occasion to enter into a minute classification and analysis of these prohibitory enactments, or to attempt a summary of the case-law construing and applying them. Some are in identical terms; others differ in details; but one general idea runs through all that irrespective of the purpose of the debt or the expenditure, even if it is universally recognized as proper and legal use of the city's money, there shall be a fixed limit to the total debt. And the method of finding that limit is generally the same, viz.: a certain percentage of the assessed values for taxation in the municipality. The fact that under our constitution and some others there are different limits, depending on the special authority of a popular vote, or on the special object of the debt, as for example sewers, water-works etc., does not affect the principle which underlies all.

Such is the generic form (ignoring local variations) into which have been crystallized the results of litigation, political controversy, popular discussion and expert study on this important phase of municipal life. But it may be questioned whether, in view of our experience with such limitations, it was the wisest solution of the question. Three courses were open to the people of any commonwealth where the question became a living one. First, there might have been no restriction on the amount of debt, leaving each municipality, as each individual is, to find its own level of credit -to incur debts (subject to the limits on their purpose arising from its corporate character) to any amount for which it could get itself trusted. That was of course the law before any of the constitutional prohibitions was passed; and certainly the volumes of litigation over municipal debts and the general economic and financial disorders and losses springing from excessive municipal indebtedness are far greater now than then. Man, at least gregarious and corporate man, is a spending animal quite as much as he is any other kind; and he will generally spend in his corporate capacity to the end of his rope. Artificial aids to virtuous self-restraint are rarely effectual and are often debilitating by the false reliance they induce on external machinery rather than on the internal and personal character. If the citizens of any city knew that it lay with themselves and not with some arbitrary limit of the law to keep their debts down to a proper sum, and to check extravagance in their servants, the appropriating and spending boards, would they not be apt perhaps after some hard suffering to do better than all our western cities have done since 1870 in limiting their public debt? The second course which might have been adopted was to prohibit any debt that is any mortgaging of the future for the sake of the present to impose a "pay as you go" policy. Of course by this is not meant absolute spot cash payment for every municipal purchase of goods, or acceptance of service rendered, but a practical periodic payment for all current debts, somewhat such as has been forced on some of our smaller cities during the recent hard times. Something similar to this seems to prevail in at least one state — Illinois where cities are prohibited from incurring debts in any year beyond the amount of the annual tax-levy. It is perfectly

true that this plan would operate very inconveniently at times, and check or delay many large enterprises of public utility. But its advantages would also be many. The vast losses arising from extravagant and useless "improvements" so-called, far beyond present needs, the losses in taxation to carry such crushing burdens, the demoralizing effects of such extravagance and of the efforts at repudiation when the limit has been passed, or when the valuation falls and the needed funds cannot be raised by tax- - all these and other moral and financial evils are heavy offsets against the seeming prosperity born of a large tax-roll and a present high credit.

The third course which might have been adopted is that which was adopted a mathematical limit to the amount of debt, which it was fondly hoped would work automatically to keep municipalities on their financial feet, while allowing them a sufficiently broad highway for their expansion. But how many of them lost their footing in the slough of despond from 1893 to 1897 in this and other states! This plan seems to offer at different times the disadvantages which the other plans in turn combine with the merits above suggested. In good times, it tempts a city to use its credit to its very limit, without educating it in prudence as the first plan that of unlimited credit would tend to do by throwing the voters back on themselves as their own best safeguard. And in hard times, when a credit that has been husbanded and not exhausted would be most useful in tiding over the crisis, it leaves the city very much in the state of a bankrupt without cash or credit. At one time it tempts to extravagance as long as there is any chance left, at another to repudiation if there is any loophole for it; for no matter how good in morals the debts in excess of the limit are, there is always a faction ready to clamor for repudiation. And as the sense of responsibility for corporate action rests but lightly on most of us, a subtle demoralization in those directions in which civic virtue is weakest ensues under this plan.

These are some of the reasons why in a general survey of the topic of this paper some other method of dealing with municipal indebtedness seems to me preferable; and while others may not allow the same weight to them, or may think the balance to incline in favor of the existing method, every lawyer present, I am confident, will admit that recent experience in this state affords strik