94 F. 916 | 9th Cir. | 1899
after stating the facts as above, delivered the opinion of the court.
It is contended that the contract between the city of Helena and the receiver of the water company is void — First, because it was entered into without asking for bids, as required by section 4807 of the Political Code of Montana; and, second, because the city was indebted beyond the constitutional limit when the contract was made,— and that, even if the contract is not void, the judgment could not lawfully be rendered against the city, because it was indebted beyond the constitutional limit at the time when the indebtedness became due. The constitution of Montana, which was in force when the contract was made, provides as follows (article 13, § (>):
“No city, town, township or school district shall ho allowed to become in-dobted in any manner or for any purpose to an amount, including existing in-debiedness, in the aggregate exceeding three per centum oí the value! of the taxable properly therein, to be ascertained by the Iasi assessment for the state and county taxes previous to tlio incurring of such indebtedness, and all bonds or obligations in excess of such amount given by or on behalf of such city, town, township or school district shall be void.”
From the pleadings it appears that at the time of making the contract, and ever since, the actual indebtedness exceeded few!),000, whereas Ihe permitted indebtedness was no more than 8379,703.49. Did the amount due, and for .which judgment was recovered, constitute ah indebtedness against the city, within the meaning of that term ns it is used in the constitution? The question has heretofore been twice presented to the supreme court of Montana. The case of Davenport v. Kleinschmidt, 6 Mont. 502, 13 Pac. 249, involved the validity of a contract for a water supply made by the city of Helena. The charter of the city at that time prescribed “that said city shall not he authorized to incur any indebtedness on behalf of said city for any purpose whatever to exceed the sum of |20,000.” At the time of making the contract the bonded indebtedness of the city was 8-19,500, and its floating debt, consisting of outstanding warrants, was $15,000. The court held that no further indebtedness could be incurred until some of the outstanding debt had been discharged. In reaching tha t conclusion the court considered the nature of the obli-ga i ion incurred by the city for its annual supply of water, and held that it was an indebtedness, within the meaning of the provision of the charter. It distinguished that case from cases in which a special provision had been made for levying a special tax to meet water rental, as in the case of Water Co. v. Woodward, 49 Iowa, 61, and said:
“In all of the water cases arising in the state of Iowa, we are met with the general statute which authorizes all cities to contract for the erection of waterworks, and to pay for the water used by a special fund raised by a special annual tax not to exceed five mills on the dollar. Such contracts with water companies were held not to create a debt against the cities, because the water companies could never have any general claim against cities, but were held to look to the special fund alone.”
“That no political or municipal corporation, county, or other subdivision in any of the territories of the United States, shall ever become indebted in any manner or for any purpose to any amount in the aggregate, including existing indebtedness, exceeding four per centum on the value of the taxable property within such corporation, county, or subdivision, to be ascertained by the last assessment for territorial and county taxes previous to the incurring of such indebtedness.” 24 Stat. 171.
The court said:
“The contract was entered into in contemplation of a special fund being created by the city to meet liabilities incurred thereunder, and the legislature, in-said act, contemplated at the time that cities of the territory should pay for water used by them for sewerage and fire purposes from taxes levied and collected for that specific purpose. The case of Davenport v. Kleinschmidt, supra, does not disapprove the Iowa cases, holding that, because a general law provided for payment from a special fund, a liability incurred by a city to supply its inhabitants with water was not a debt, in the sense of the term as employed in the constitution of Iowa. * * * It follows from this view of the case that neither under the organic act of the territory of Montana nor the constitution of the state of Montana is or was the liability incurred by the city of Great Palls under Ordinance 17 a debt, in the sense prohibited.”
But when the Montana Codes were adopted, in the year 1895, the statute which controlled the decision in the Great Falls Case was repealed. There was no longer a statute creating a special fund for the payment of water rentals. The conditions again existed under which the ruling had been made in Davenport v. Klein-schmidt. The provisions of the law which governed the city when the present indebtedness was incurred are the following (Pol. Code, § 4872):
“The council must, on the second Monday in August in each year, by resolution, determine the amount of city or town taxes for all purposes, to be levied and assessed on the taxable property in the town or city for the current year, and the city clerk must at once certify to the city treasurer a copy of such resolution, and the city treasurer must collect the taxes as in this article provided.”
And Pol. Code, § 48.14:
“The amount of taxes to be assessed and levied for general municipal or administrative purposes must not exceed one per centum on the assessed value of the taxable property of the city or town, and the council may distribute the money into such funds as are prescribed by ordinance.”
Recurring to the two decisions of the Montana courts, it may be said, in brief, that Davenport v. Kleinschmidt is authority for the proposition that a liability incurred for water rental is a debt, within the prohibition of the statute, for it is payable out of the
“But we think the weight of authority, as well as of reason, favors the more liberal construction that a municipal corporation may contract for a supply of water or gas, or a like necessary, and may stipulate for the payment of an annual rental for the gas or water furnished each year, notwithstanding the aggregate of its rentals during the life of the contract may exceed the amount of the indebtedness limited by the charter. There is a distinction between a debt and a contract for a future indebtedness to be incurred provided the contracting party perform the agreement out of which the debt may arise. * * * The obvious purpose of limitations of this kind in municipal charters is to prevent the improvident contracting- of debts for other than the ordinary current expenses of the municipality. It certainly has no reference to debts incurred for the salaries of municipal officers, members of the fire and police departments, school teachers, or other salaried employes, to whom the city necessarily becomes indebted in the ordinary conduct of municipal affairs, and for the discharge of which money is annually raised by taxation. For all purposes necessary to the exercise of their corporate powers, they are at liberty to make contracts, regardless of the statutory limitation, — provided, at least, that the amount to be raised each year does not exceed the indebtedness allowed by the charter. Among these purposes is the prevention of fires, the purchase of fire engines, the pay of firemen, and the supply of water by the payment of annual rentals therefor.”
In that decision the supreme court construed no more liberally the powers of municipal corporations to enter into contracts for supplies of necessaries than did this court in Keihl v. City of South Bend. It will be noted that in the language of the opinion so quoted a limitation is placed upon the extent of the indebtedness which may be incurred in the face of the statutory prohibition. 'Cities are declared to be'at liberty to make certain kinds of contracts, regardless of the limitation, provided “that thfe amount to be raised each year does not exceed „the indebtedness allowed by the charter.” The present case does not meet the requirement of the test so established. The amount to be raised each year under the contract between the city and the receiver exceeded the total indebtedness allowed by the law of Montana. At the time when tne debt for which this suit was brought was contracted, and when