65 P.2d 857 | N.M. | 1937
In this case it appears that the First National Bank of Raton sued the City of Santa Fe, a municipal corporation, and recovered judgment on nine sewer certificates of a large issue uttered by the defendant, City of Santa Fe, for the purpose of paying the cost of constructing sewer improvements in said city, under authority of Comp.St. 1929, §§ 90-2301 to 90-2308. The complaint states that by the terms of said certificates they were to be payable from money received from special assessments levied to pay for said sewer improvements, and that in addition thereto the defendant city further promised and agreed that any deficiency in said fund to pay said certificates or the interest thereon should be paid from the general revenues of the defendant. It was then alleged that the fund from the special assessment levied to pay said sewer improvements was an insufficient amount to pay the said sewer certificates and that there was and is a complete deficiency in said fund.
The defendant answered admitting all of the allegations of the complaint except that contained in paragraph 8, and the answer to that paragraph reads as follows: "That defendant admits the allegations in paragraph VIII of each count, except that defendant denies that there was or is any deficiency in said fund for the sole reason that assessments, sufficient in amount to pay said certificates, were duly and regularly made by the City Council against property sufficient in valuation to discharge the same, and that liens therefor were duly filed and *132 recorded in the office of the County Clerk of Santa Fe County, and that, when said assessments are collected, there will be a sufficient amount in said fund to pay said certificate."
The answer also raised a constitutional question by alleging that the debt sued upon was not contracted by an ordinance irrepealable until the indebtedness was paid, and which specified the purpose for which the funds to be raised were to be used, and which provided for a levy of a tax to pay the interest and principal thereon as required by section 12 of article 9 of the State Constitution, and further that the question of incurring such debt was not submitted at an election to a vote of the qualified electors of the city, nor had a majority of the qualified electors ever voted creating such debt as required by said section of the Constitution.
For a third and further defense it was alleged that the indebtedness was not paid and it could not be paid out of current revenues and money actually collected during the fiscal years in which said bonds were issued or during the years in which they were matured.
The plaintiff demurred to this answer upon the ground that the law under which the sewer certificates in question were issued does not require the passage of an irrepealable taxing ordinance and does not require the submission of the question of incurring such indebtedness to the electors, and further by reason of section 12 of article 9 of the New Mexico Constitution are not applicable to the character of obligation sued on in this action, and further as to the third separate defense that it was immaterial whether the indebtedness would be paid out of moneys collected during the current year. The demurrer was sustained, and the defendant having elected to stand on its answer, judgment was entered on the pleadings in favor of the plaintiff for the principal amount of the sewer certificates together with accrued interest to the date of judgment. Thereafter the City of Santa Fe sued out a writ of error in this court to review the judgment.
We are urged to pass upon the rights of the certificate holders as well as the constitutionality of the act since these questions are involved in much pending litigation.
Plaintiff in error will be referred to herein as the City and defendant in error as the Bank.
The main point argued is that the indebtedness sued upon is invalid because it was not incurred in accordance with section 12 of article 9 of the State Constitution, which provides as follows:
"Debt Contracting Power of Municipalities — Election — Limitation.
"Sec. 12. No city, town or village shall contract any debt except by an ordinance, which shall be irrepealable until the indebtedness therein provided for shall have been fully paid or discharged, and which shall specify the purposes to which the funds to be raised shall be applied, and which shall provide for the levy of a tax, not exceeding *133 twelve mills on the dollar upon all taxable property within such city, town or village, sufficient to pay the interest on, and to extinguish the principal of, such debt within fifty years. The proceeds of such tax shall be applied only to the payment of such interest and principal. No such debt shall be created unless the question of incurring the same shall, at a regular election for councilmen, aldermen or other officers of such city, town or village, have been submitted to a vote of such qualified electors thereof as have paid a property tax therein during the preceding year, and a majority of those voting on the question, by ballot deposited in a separate ballot box, shall have voted in favor of creating such debt."
The certificates sued upon are all on the same form, the material parts of which are as follows:
"The City of Santa Fe, * * * for value received, hereby promises to pay to the bearer hereof the sum of Five Hundred Dollars, * * *
"This certificate shall be payable from money received from special assessments levied to pay for sewer improvements, but any deficiency in the fund to pay this certificate or the interest thereon shall be paid from the general revenues of said municipality.
"This certificate is issued for the purpose of paying the cost of constructing sewer improvements in the said City under and by virtue of Sections 3705 to 3712 inclusive, of the New Mexico Statutes, Codification of 1915, and all other laws of the State of New Mexico thereunto enabling, and it is hereby certified and recited that all requirements of law have been fully complied with by the officers of said City in the issuance of said certificates, and that all proceedings and things with reference to making said improvements, to the fixing of the assessment lien against the property improved, and the issuance of this certificate, have been lawfully taken and performed, and the said City has agreed to collect and enforce the payment of said special assessments, and in the event it becomes necessary to foreclose the lien of such certificates to do so at the expense of said City.
"For the collection and enforcement of said assessments and the foreclosure of the lien thereof the City of Santa Fe hereby pledges the exercise of all lawful corporate powers."
The Bank points out that this case falls within what it terms the contingent liability doctrine and maintains that the statute under which the certificates were issued is constitutional, notwithstanding it does not provide for an election, and that the word "debt" as used in section 12, article 9 of the Constitution, does not embrace the kind of obligation sued on in this action. The Bank cites American Company v. City of Lakeport,
Several of the cases cited by the Bank involve the validity of statutes creating general guaranty funds to meet deficiencies in special funds authorized for the purpose of discharging city improvement bonds. California has such a statute, and the cited case of American Company v. City of Lakeport, supra, discusses sections of that statute.
In the late case of Kerr Glass Mfg. Corp. v. City of San Buenaventura,
"The respondents aver that the sole reason for the inadequacy of the bond redemption fund is the failure of the landowners in said special assessment district to pay the installments of the assessment levied to discharge the cost of such improvement; that approximately 85 per cent. of the lands in the district are delinquent; that the value of the lands so delinquent is less than the total amount of delinquencies, penalties, and charges accrued against them; that there have been no sales or redemptions of such lands, and there are not likely to be any in the near future; and that the bond redemption fund is therefore insolvent. In its answer the respondent city admits its willingness and offer to pay the petitioner on a pro rata basis, computed on the ratio which the amount due to the petitioner bears to the total amount still unpaid on all outstanding bonds of series E, including also those which have not yet matured.
"The principal question for determination is whether the petitioner is entitled to payment in full from the bond redemption fund, there being sufficient funds for payment to it in full, although not sufficient to pay in full all of the matured claims against said fund; or whether it must accept payment on some pro rata basis to be determined.
"Preliminarily it must be said that the petitioner is not entitled to a direction for a levy of taxes sufficient to pay the delinquencies against the lands purchased by the city at delinquent tax sales which occurred subsequent to the initial delinquencies which compelled the sale. It has so been decided in the case of American Co. v. City of Lakeport,
"More recently in the case of Hammond v. City of Burbank (Cal.Sup.)
"A further review of the cited cases or of the pertinent sections of the Improvement Bond Act involved therein is unnecessary for the purpose of making the observation that the immediate and important result of such recent decisions, viz., that the land in the district is the sole source of payment for the cost of the improvement and that the obligation of the municipality is limited merely to creating a revolving fund by certain authorized advances to the bond redemption fund, has a direct bearing upon the solution of the principal problem presented here.
"Advances to the fund by the city are authorized to be made from two possible sources, one the mandatory levy not exceeding 10 cents on each $100 of taxable property in the city, further limited by the amount required to meet the purchase price of lands sold or to be sold to the city at delinquent tax sales; and, second, the transfer of moneys from the general fund when there are surplus moneys available, as advances on the amount of improvement assessment installments falling due on lands sold to the city subsequent to the delinquent tax sales. That fact, together with the further holding in the case of Hammond v. City of Burbank, supra, that the duty of the city to levy and collect the 10-cent tax is continuing only so long as advances to the redemption fund on account of the purchase price of lands sold to the city have not been made, and that the city may not `pyramid' the levies omitted in prior years, make manifest the preliminary conclusion that the petitioner is not entitled to have the respondents do more than levy a 10-cent tax each year until such levy has realized moneys sufficient to advance to the bond redemption fund the purchase price of all land sold to the city at delinquent tax sales. This duty the city has performed, and it is not shown that there are surplus moneys in the general fund available for transfer to the bond redemption fund for the payment of assessment installments falling due on *136 such lands subsequent to the delinquent tax sales. It follows that the petitioner is not entitled to a writ directing the respondents in respect to any tax levy or transfer of funds.
"There remains for determination the principal question whether the petitioner is entitled to a writ directing payment to it in full of the sum of $17,000 due on the bonds held by it. If it is not so entitled, or if it is not entitled to any partial payment in excess of the offer made by the district and refused, its petition in this respect must also be denied. State ex rel. Sturdivant Bank v. Little River Drainage Dist.,
"The petitioner relies mainly upon the provisions of section 3 of the Improvement Bond Act of 1915 (as amended by St. 1929, p. 1823), and upon the decision in the case of Bates v. McHenry,
"Section 3 of the act provides that the bonds and interest `shall be paid at the office of the city treasurer of said municipality who shall keep a redemption fund designated by the name of said bonds, into which he shall place all sums received by him from the collection of the assessments made for the payment of the cost of the work or improvements upon which the said bonds are issued and of the interest and penalties thereon and from which fund he shall disburse and pay the said bonds andthe interest due thereon upon presentation of the proper bondsand coupons; and under no circumstances shall said bonds or the interest thereon be paid out of any other fund. Said city treasurer shall keep a register * * * and shall cancel and file each bond and coupon so paid.' The petitioner contends that the italicized language of said section compels the same result as in the case of Bates v. McHenry, supra. That case involved section 52 of the California Irrigation District Law (St. 1931, p. 172) which provided that upon presentation of any bond or interest coupon, payment should be made from the bond fund. In the opinion it was pointed out that the particular language of the act, together with the further provisions that unpaid bonds and interest coupons should be registered and bear interest from the date of registration and creating an unlimited continuing obligation of the district to levy sufficient taxes to discharge the obligation in full, distinguished the facts from such cases as Thomas v. Patterson,
We find little support in the California decisions for the proposition that that part of the contract sued upon, which is treated in the complaint as an absolute guaranty by the City, is not violative of the constitutional provision quoted above requiring an approving vote of the taxpayers.
The Bank criticizes the quotation from 19 R.C.L. § 281, p. 985, appearing in Seward v. Bowers,
The Supreme Court of Florida, in the case of Brash v. State Tuberculosis Board et al.,
Williams v. Town of Dunnellon (Fla.)
Many cases touching upon the constitutional question are reviewed in Seward v. Bowers, supra; State v. Connelly,
The next question is whether or not the contract is severable. The severability of contracts is recognized in this state. Hodges et al. v. City of Roswell et al.,
The rule is stated in 3 McQuillin, Municipal Corporations (2d Ed.) § 1352, p. 940, as follows:
"The well settled rule that where an agreement is illegal in part, the part which is good may be enforced, provided it can be separated from the part which is bad, but otherwise the contract will be declared invalid in toto, applies to contracts made by municipal corporations. A municipal contract void as to an inconsiderable or insignificant part is not invalid in toto, especially where the city has received substantial benefits thereunder and cannot place the other party in statu quo.
"When a part of a divisible contract is ultra vires, but neither malum in se nor malum prohibitum, the remainder may be enforced, unless it appears from a consideration of the whole contract that it would not have been made independently of the part which is void."
In Manning v. Ellicott,
See, also, Presbury v. Fisher Bennett,
The guaranty was merely unauthorized but involved no moral turpitude. It could be eliminated from the contract without affecting the right of the holders of the sewer certificates to the proceeds of the liens. The City had power to make a contract without the approving vote of the qualified taxpayers for sewer improvements so long as the obligation was confined to the property benefited by the improvements. A sewerage system in a city as large and thickly populated as Santa Fe is so essential to the public health that its continuous operation is a governmental duty. Const. art. 9, § 13, makes exception of such plants out of the debt limitation thereby imposed. The City could contract for sewerage improvement if it had funds available with which to pay for the same; and it has power to levy taxes. Barker v. State,
In State v. City of Carlsbad,
The learned trial court erred in sustaining the demurrer. The cause should be remanded to the district court with directions to set aside the judgment and overrule the demurrer, and it is so ordered.
BICKLEY and ZINN, JJ., concur.
SADLER and BRICE, JJ., did not participate. *141