97 Ind. 1 | Ind. | 1884
The complaint of the appellee avers that he is a resident taxpayer of the city of "Valparaiso; that the' municipal officers are about to let a contract to a water-works company for supplying the city with water for a period of twenty years, at an annual expense to the municipality of $6,000; that the corporate indebtedness exceeds five per centum of the assessed value of the taxable property of the city and that there is no money in the treasury. The prayer of the complaint is for an injunction restraining the corporate authorities from entering into the contract. . .
The appellants answered, admitting that the appellee was a taxpayer; that the city was indebted in excess of two per centum of the aggregate value of the taxable property, and -averring that the city has a population of over five thousand persons and is rapidly increasing in population; that it has no facilities for extinguishing fires except three cisterns, which-are wholly inadequate, and that the safety of the city demands that the contract mentioned in the complaint be entered into and a supply of water secured; that the assessed value of taxable property, as shown by the assessment roll,
A taxpayer of a municipal corporation may maintain a suit to enjoin the corporate authorities from entering into an unauthorized contact. Sackett v. City of New Albany, 88 Ind. 473 (45 Am. R. 467); City of Madison v. Smith, 83 Ind. 502; Noble v. City of Vincennes, 42 Ind. 125; 2 Dillon Munic. Corp. (3d ed.), sec. 922.
A city has authority to make contracts for a supply of water for the public use. City of Vincennes v. Callender, 86 Ind. 184. The authority is, in a general sense, a discretionary one, but it is by no means without limitation. ' The authority is so far of a discretionary character as to authorize the corporate officers to determine when the wants of the city demand a supply of water, and with this decision courts can not interfere. But the power can not be so exercised as to create a corporate debt beyond that limited by law, nor can it be so exercised as to surrender or suspend legislative power. While it is true that courts will not interfere with the exercise of discretionary powers, it is also true that they will interfere to prevent an abuse of discretion, or to prevent the • corporate officers from transcending their authority. It is also true that courts will not interfere with mere matters of municipal legislation, but when the legislation is sought to
The important and controlling question which confronts us here is as to the power of the municipal corporation to enter into the contract described in the pleadings. We have no doubt that the corporation had authority to contract for a supply of water for a period of twenty years, and that the contract can not be overthrown solely on the ground that it is a surrender of legislative power. There is a distinction between powers of a legislative character and powers-of a business nature. The power to execute a contract for goods, for houses, for gas, for Avater and the like, is neither a judicial nor a legislative power, but is a purely business power. The question is, however, so firmly settled by authority that we deem it unnecessary to further discuss it. City of Indianapolis v. Indianapolis, etc., Co., 66 Ind. 396; Dillon Munic. Corp. (3d ed.), sections 473, 474, authorities n.
In 1881 an amendment to the Constitution was adopted, in which this provision is incorporated: “ No political or municipal corporation in this State shall ever become indebted, in any manner or for any purpose, to an amount, in the aggregate, exceeding two per centum on the value of the taxable property within such corporation, to be ascertained by- the last assessment for State and county taxes previous to the incurring of such indebtedness; and all bonds or obligations, in excess of such amount, given by such corporation, shall be void.” This provision received consideration in Sackett v. City of New Albany, 88 Ind. 473, but the question there presented and decided was very different from that which here faces us. The point decided in that case was that a city could not issue bonds for current expenses where there were no funds in the treasury and the existing indebtedness exceeded tAvo
The question is a grave one, and not entirely without difficulty. If we hold that the contract to pay an annual water rent of $6,000 during a period of twenty years creates a debt for the aggregate sum of $120,000, and is a debt within the prohibition embodied in the Constitution, we should lay down a principle that would, in a great majority of instances, put an end to municipal government. If it be true that an agreement to pay a given sum each year for a long period of years constitutes a debt for the aggregate sum resulting from adding together all the yearly instalments, then it is extremely doubtful whether there is a city in the State that has authority to repair a street, dig a cistern or build a sidewalk, for nearly every city has contracts for gas and water supplies running for a long series of years, in which the aggregate amount of annual rents would of themselves equal, if not exceed, the limit of two per centum on the value of taxable property. ’We know, as matter of general knowledge, that water-works and gas-works require the outlay of enormous sums of money, and that such enterprises are not undertaken under contracts running for short periods of time. If the aggregate sum of all the yearly rents is to be taken as a debt within the meaning of the Constitution, then many cities will be left without the means of procuring things so essential to public welfare and safety. We are not to presume, unless coerced by the rigor of the words used, that the framers of the amendment, or the electors who voted for it, intended to destroy the corporate existence of our municipalities or to leave them without water or light. Nor are we to presume that the electors were ignorant of the existence, condition and necessities of our great towns and cities. On the contrary, we are to pre
In view of the warring among the adjudged cases it is not easy to affirm that the word “debt” has a firmly settled meaning. In one case it was said, “But the compensation to this contractor was not a debt within the sense of this provision, until the service was performed and the contractor was entitled to be paid. It was, no doubt, an obligation, in some sense, from the time the contract was entered into, but it was not a debt in the popular sense” of the term. Weston v. City of Syracuse, 17 N. Y. 110. A similar definition is annexed to the word in the opinion of the court, written by the eminent jurist, Judge Denio, in Garrison v. Howe, 17 N. Y.
Our leading purpose is, therefore, to ascertain what meaning the authors of the constitution intended the word “indebted” to have, and we address ourselves to its accomplishment. It is clear that if the city should fail to perform its contract, the recovery would be for damages for a breach of contract, and not the contract rate of compensation, and, therefore, it can not be true that the whole of the compensation is certainly demandable by the corporation with which it •contracts.’ It may be that but a small part of even one year’s compensation can be recovered. On the other hand, the failure of the water company to perform may put an end to the contract, and that would, of course, terminate all liability
The effect of the proposed contract is that the city shall be liable for water as it is furnished and not before. It is not until after the water has been furnished that there can be justly said to be a debt, for, while there might be a liability for damages, in case of a breach on the part of the city, there is certainly none under the contract until the city has received that for which it contracted. If it can pay this indebtedness when it comes into existence, without exceeding-the constitutional limitation, then there is no violation of the letter, and surely none of the spirit of the Constitution. "We are careful to say when the debt comes into existence, and not to say when it becomes due, for between these things there is an essential difference. The object to be accomplished by the amendment, the condition and necessities of our municipalities, as known to the authors of the amendment, and the just force of the language employed, authorize us to conclude that the inhibition of the Constitution does not apply to contracts for water to be paid for as the water is furnished, provided it is shown that the contract price can be paid from the current revenues as the water is furnished and without increasing the corporate indebtedness beyond the constitutional limit.
The adjudged cases sustain our conclusion. The cases upon which our case of Sackett v. City of New Albany, supra, is based, were decided by the Supreme Court of Illinois, and having once accepted the decisions of that court as authoritative, it is both consistent and logical to follow them so far as we can without yielding our own deliberate convictions. Happily, however, the decision of that court declares the rule to be that which we have here endeavored to prove the correct one.
The clause in our Constitution is, in legal effect, and almost in words, the same as that of Iowa, and it is evident that it
The Supreme Court of Pennsylvania, in Appeal of the City of Erie, 91 Pa. St. 398, held that an agreement binding the corporation to pay an annual rent for property created an indebtedness within the meaning of the Constitution, but in the course of the opinion said: “ Many authorities have been cited for the defence, none of which seem to us to bear upon the point in issue. There is one, however, which we notice because of its general pertinency. In Dillon on Municipal Corporations, section 88, the learned author cites an Iowa case, involving the validity of a contract by a city fór a supply of water, in which it is said : ‘ When a contract made by a municipal corporation pertains to its ordinary expenses, and is, together with other like expenses, within the limit of its current revenues and such special taxes as it may legally and in good faith intend to levy therefor, such contract does not constitute the “incurring of indebtedness” within the meaning of the constitutional provision limiting the power of municipal corporations to contract debts.’ This, we hesitate not to say, is a sound constitutional interpretation, and in a similar case might well be adopted in the construction of our own Constitution. If the contracts and engagements of municipal corporations do not overreach their current revenues, no objections can lawfully be made to them, however great the indebtedness of such municipalities may be; for in such case their engagements do not extend beyond their present means of payment, and so no debt is created. Had the defendant in the bill before us, instead of demurring, made answer that its annual revenues were sufficient, over and above the pay
We have reviewed all the cases cited by counsel, and such others as we have been able to find upon a diligent search, and are satisfied that the conclusion we have reached is in harmony- with the decisions made in cases where the question has. been considered and decided, and is not opposed in principle to any of the eases bearing upon the general question.
We have assumed that the supply of water is necessary to the welfare of the inhabitants of the municipality, and that it constitutes one of the items of current expenditure essential to the welfare of the corporation, and this assumption rests upon the facts pleaded in the answer. This distinguishes the ease, as is well shown in Grant v. City of Davenport, supra, from the cases in which property is purchased or subscriptions made to the capital stock of railroad or other corporations. It is the items of expense essential to the maintenance of corporate existence, such as light, water, labor and the like, that constitute current expenses payable out of current revenues. The authorities agree that current revenues may be applied to such purposes even though the effect be to postpone judgment creditors. Coy v. City Council, 17 Iowa, 1; Coffin v. City Council, 26 Iowa, 515; Grant v. City of Davenport, supra. When the current revenues are-
If a bond, note, or other obligation is executed, then, doubtless, a debt is created, for such things constitute evidences of indebtedness, but that is not the case here. So, if the consideration of the contract is received at once, instead of being yielded in the future or at intervals, then it might be said that there was a debt, but where there is nothing owing until after the thing contracted for is done or furnished, and that thing is a part of the necessary yearly expenses of
If a different view be taken from that which we maintain, startling results would follow in the application of the principle to other cases. Take, for instance, a merchant having a large number of clerks employed for a year each, and at a fixed salary, could such a merchant in making out his tax-list deduct the aggregate amount of all the salaries computed to the end of the year, on the ground that it constituted an indebtedness ? Take, again, the same supposed case, and would any one say that the merchant’s solvency was to be determined by taking into consideration the aggregate of the salaries that would be due his clerks at the end of the year? Take, for another example, the case of a private corporation actively engaged in business, could it be pushed to the wall on the ground that it was insolvent, by evidence that it had contracted with a large number of men for a year’s service, and that the aggregate sum due at the end of the year would be much greater than the value of its property at the opening of the year? Take still another example, a municipal corporation — and here there need be no supposition — with its officers (some of them with terms of several years), its policemen and its firemen, is it indebted, at the beginning of the year, for the grand aggregate of all the salaries to the end of all the terms ? In the case of the merchant and of the private corporation, it certainly would be held, without hesitation or doubt, that if the current income or profit would discharge the obligations there would be no indebtedness; and this must be true of municipal corporations in cases where there will be money in the treasury, derived from current revenues, sufficient to pay for services rendered or things furnished, as part of the current corporate expenses, when the services are ren
Judgment reversed, with instructions to overrule the demurrer to the answer, and to proceed in accordance with this, opinion.