28 P.2d 455 | Mont. | 1933
Lead Opinion
Between September 9, 1931, and June 30, 1932, the district issued warrants aggregating $4,374.10, and between June 30, 1932, and June 30, 1933, warrants aggregating $5,610.48, all drawn upon the general fund, and all of which "with interest thereon" were outstanding on June 30, 1933, and are still unpaid. It is these warrants which are challenged.
The value of the taxable property in the district in the year 1931 was $943,789; the district had in that year a bonded indebtedness of $21,724.24, and a warrant indebtedness of $16,584.14, with $2,038.48 in the sinking fund and $3,290.43 in the general fund; thus the excess of the indebtedness above the cash on hand amounted to $32,981.47, whereas 3 per cent. of the value of the property was $28,313.67. In 1932, the value of the taxable property in the district was $849,360, the bonded indebtedness was $19,372.08, and the warrant indebtedness $13,275.53, with $932.63 in the sinking fund and $2,137.20 in the general fund; thus for that year the excess of the indebtedness above cash on hand was $29,578.58, whereas 3 per cent. of the value of the property was $25,480.80. On June 30, 1933, the value of the taxable property was $770,390, the bonded indebtedness $18,866.39, and the warrant indebtedness $11,234.21, with $988.33 in the sinking fund and $1,667.74 in the general fund; thus the excess of the indebtedness above cash on hand was $26,444.53, and 3 per cent. of the value of the property was $23,111.70. Therefore, it is alleged in the complaint, the net indebtedness of the district (gross indebtedness after deducting cash on hand) was in excess of 3 per cent. of the taxable property of the district during the entire period of time when the indebtedness was contracted for which warrants were issued.
It is alleged in the answer that all the warrants in question were issued in full compliance with sections 964 and 1012, Revised Codes 1921, and that at no time between September 9, 1931, and June 30, 1933, did the total indebtedness of the district exceed 3 per cent. of its assessed valuation, plus taxes levied and in process of collection; and it is alleged and not denied, therefore admitted, that during each of the years in *535 question the trustees were reasonably justified in deciding and determining, as they did, that the anticipated revenues from taxes levied in the respective years would greatly exceed all expense of the district for the respective years, including the amounts for which the warrants were issued; that on June 30, 1933, there were outstanding and unpaid taxes duly assessed and levied in the years 1929, 1930, 1931, and 1932, due, owing and payable to the school district and in course of collection in excess of $7,500, and in addition thereto unpaid taxes assessed and levied in years prior to 1929, secured by liens provided by law upon the property taxed, likewise due to the school district, the whole of which unpaid taxes, together with 3 per centum of the value of the taxable property in the school district as ascertained by the assessments for state and county taxes in 1932, amounted to a sum greatly in excess of the total indebtedness of the school district; that each of the warrants was issued in anticipation of school moneys which had at the time of issuance been levied, but not collected; that, if all the taxes levied for the use of the district during the years 1930, 1931, and 1932 had been paid, the district would not now be indebted in any sum in excess of an amount which could be paid in addition to current expenses out of the collection of 1933 taxes; but that 33.2 per centum of the total tax levied by the school district in 1933, and 32.76 per centum of the total tax levied by the school district in 1932, was not paid when due, but was allowed to become delinquent; that all the outstanding warrants were issued for current expenses in order to keep open the schools of the district and provide education for those children entitled to the same and required by law to attend school. Section 6 of Article XIII of the Constitution of Montana provides: "No city, town, township or school district shall be allowed to become indebted in any manner or for any purpose to an amount, including existing indebtedness, in the aggregate *536 exceeding three (3) per centum of the value of the taxable property therein, 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 or on behalf of such city, town, township or school district shall be void. * * *"
Debt limit provisions of this type, the conditions which called them forth, and the evils they were designed to remedy, were well known to the members of our Constitutional Convention. By reason of public extravagance the people of many states, enmeshed in debt well-nigh to the point of bankruptcy, had determined to put an end to the danger by setting a limit to expenditures in their Constitutions. (Note to Hagan v.Commissioner's Court, 37 L.R.A. (n.s.) 1061; Winchester v.Nelson,
The framers of our Constitution, many of whom came from states with similar provisions, heeding the experience of older communities, sought to profit by their example by writing into the fundamental charter the foregoing section and similar restrictions. The people adopted the Constitution with the declaration that "the provisions of this constitution are mandatory and prohibitory, unless by express words they are declared to be otherwise." (Art. III, sec. 29.)
It is our duty to follow the plain terms of constitutional provisions. Hitherto this court has upheld the provisions of section 6 of Article XIII in the spirit in which it was enacted, and to that course we shall adhere. "The constitutional limitation in question is clear and unambiguous, and means just what it says, to wit, that no indebtedness may be contracted in any manner or amount, for any purpose, in excess of the prescribed limit. (State ex rel. Helena Water Works Co. v.City of Helena,
Illinois has a provision similar to ours which, as this court pointed out in State ex rel. Helena Water Works Co. v. City *537 of Helena, supra, was construed by the supreme court of the United States in Litchfield v. Ballou,
The object of the provision, said the supreme court of Illinois, is "to protect the property of citizens from being burdened beyond 5 per cent. of its value, as ascertained by the assessment for state and county taxes, with any indebtedness extending into the future, and any plan or scheme which has the effect of creating such a burden is prohibited by the Constitution." (People ex rel. Scoon v. Chicago Alton R.Co.,
As has been seen from the allegations of the defendants'[1] answer, it is sought to show that the warrants which were issued in excess of the constitutional limit are valid because they were issued for current expenses and in anticipation of valid tax levies already made, and therefore do not constitute an "indebtedness" within the contemplation of the constitutional provision. Counsel for the defendants in their argument present the situation fairly and concede that it is difficult to reconcile their position with prior decisions of this court. The difficulty with which they are confronted is indeed great, for the reason that the decisions upon the vital issue *538
here are stare decisis. In State ex rel. Helena Water WorksCo. v. City of Helena, supra, wherein the same argument was advanced, and in which the same constitutional provision was under consideration, it was held, contrary to defendants' position, in language which is controlling here: "We can conceive of no possible ground for the supposed distinction between an indebtedness for current expenses, payable out of the current revenues, and one for the payment of which no provision has been made, and for which the city is generally liable" — citing many cases. (And see Helena Water Works Co. v. City of Helena,
Likewise the argument that the school district has "assets" in[2] the form of delinquent taxes has been denied. Uncollected delinquent taxes cannot be regarded as cash on hand or the equivalent thereof. In Jordan v. Andrus,
The fact is the warrants represent an indebtedness of the district; that the district may some day receive the amounts due on delinquent taxes does not alter the situation. To say that the district does not owe the debt because it has assets upon which it may some day realize "confuses indebtedness of the district, as used in the Constitution, with the question of insolvency of the district. The Constitution does not deal with the question of solvency, but with indebtedness." (Riesen v. School District,
The defendants rely, but without substantial support, upon[3] State ex rel. Rankin v. State Board of Examiners,
This court has set at rest the meaning and application of the word "indebtedness," as employed in section 6 of Article XIII, inJordan v. Andrus, supra; State ex rel. Helena Water WorksCo. v. City of Helena, supra; Helena Water Works Co. v.City of Helena,
The power of the legislative assembly to make appropriations[5] is limited only by the reasonably anticipated income of the state from all sources subject to appropriation (State exrel. Toomey v. State Board of Examiners, supra; State ex rel.Bennett v. State Board of Examiners,
Warrants issued pursuant to lawful appropriations within the limitations above described are valid and do not create an "indebtedness" within the purview of section 2 of Article XIII. (State ex rel. Rankin v. State Board of Examiners, supra;State ex rel. Toomey v. State Board of Examiners, supra.)
When the provisions of section 12 of Article XII and section 2 of Article XIII are compared, it must be apparent that the "indebtedness" referred to in the latter section is not within the contemplation of the former; clearly the latter section has no reference to the ordinary running expenses of the state and its institutions which must be paid through legislative action exercised within the limitations prescribed. Moreover, section 12 of Article XII carries its own inhibition, and the legislative assembly must heed its mandate. It may not wilfully transgress the provisions of the supreme law. If it does, its act is a nullity. Otherwise, the positive requirements of the Constitution would be subordinate to legislative control. "It is absurd to say that a provision of the Constitution, expressly designed to restrain and confine legislation within certain definite limits, is nevertheless subject to the unrestrained legislative will." (In re Appropriations,
As was pointed out in the Helena Water Works Case (
No better example of the existence of an indebtedness prohibited by the Constitution can be found than that which is illustrated in the present case. The school district without the issuance of the proposed bonds is indebted to the full extent of 3 per centum of the value of the taxable property therein as ascertained by the method provided by law. If in addition thereto bonds are issued and sold to the amount of $8,602.74, the district will be indebted to that extent in excess of 3 per centum of the value of the taxable property therein. This is irrefutable.
"It is the duty of the courts to declare the law as it is, and[6] not to exercise their ingenuity in trying to devise means by which its clear and explicit injunctions may be evaded," as Mr. Chief Justice Brantly said in Helena Water Works Co. v.City of Helena,
It was the policy of the state until 1901, as it had been that[7-9] of the territory since 1871, to prohibit school trustees from drawing a warrant "unless there is money in the treasury to the credit of such district." (Codified Statutes, 1871-72, 621; Compiled Statutes 1887, p. 1177, Div. 5, sec. 1869; Political Code 1895, sec. 1737.) The seventh legislative assembly added: "Provided, that school trustees shall have the authority to issue warrants in anticipation of school moneys which have been levied but not collected, for the payment of current expenses of schools, but such warrants shall not be drawn in any amount in excess of the sum already levied." *543 (Laws 1901, p. 121.) As thus amended, section 1737 of the Political Code became successively section 830, Revised Codes of 1907, and section 964, Revised Codes of 1921. In 1925 an additional proviso, not material here, was added to section 964. (Laws 1925, p. 108, chap. 82.) Section 1012, Revised Codes 1921, is complementary to section 964 to the extent that it permits school trustees to issue warrants in anticipation of school moneys which have been levied but not collected, for the payment of current expenses of schools, not in excess of the sum levied.
It is obvious that the plight of the district is the result of the permission given school trustees to issue warrants in anticipation of tax collections. In extending the privilege the legistive assembly might have foreseen that there might be a shortage of funds because of tax delinquencies, which would result in a failure to pay the warrants from current funds, but it was unnecessary for it to command that which the Constitution commanded, that no warrants be issued beyond the limitations of the Constitution. (See Helena Water Works Co. v. City ofHelena,
School trustees can only exercise such powers as the law confers upon them; they are bound to know that they cannot go beyond its limitations. When the district reached the limit of indebtedness permitted by the Constitution, the trustees were bound to know that they had no right to issue a warrant constituting a general indebtedness of the district. The limitation being applicable to all debts, irrespective of their form, in determining the amount of school district indebtedness at any time, outstanding warrants are to be taken into account, and any warrant which increases the indebtedness over and beyond the limit fixed is in violation of the constitutional provision. (People ex rel. Seeley v. May,
It is noteworthy that, in permitting school trustees to issue warrants in anticipation of taxes duly levied, the legislative *544
assembly did not intend to place school districts upon a pay-as-you-go plan. Although after the decisions in State exrel. Helena Water Works Co. v. City of Helena, supra, andHelena Water Works Co. v. City of Helena,
When the legislative assembly convened in 1933 it was found[10, 11] that, by reason of the inability of property owners to pay their taxes, many school districts had issued warrants in anticipation of collections which were not made, and there existed unpaid warrants the validity of which was questioned Viewing this situation, the legislature enacted Chapter 160 of the Session Laws of 1933, embracing among other sections a validating statute which reads as follows: "All warrants issued by any school district, whether issued in excess of taxes levied, or otherwise, and outstanding and unpaid at the close of the school year ending June 30, 1933, are hereby validated and declared to be lawful, valid and subsisting warrants of the school district; provided that the total amount of such outstanding warrants together with the total amount of all bonds issued by such school district and outstanding and unpaid on June 30, 1933, shall not exceed the limit of indebtedness of school districts as prescribed in section 6 of Article XIII of the Constitution of the State of Montana." (Sec. 2, Chap. 160, Laws of 1933.) The Act also authorizes the issuance of funding bonds.
It is apparent that in enacting this section it was intended to comply strictly with the plain terms of the Constitution; the legislative assembly withheld from the trustees the power to issue bonds to refund warrants which were issued beyond the limit of constitutional indebtedness. The proposed bonds look into the future. They are to be payable on the amortization plan in ten years, redeemable in five years, from the date *545 of issue, and are to bear interest at the rate of not to exceed 6 per cent. per annum, payable semi-annually.
From what has been said it is clear that the theory put forth to authorize the issuance of the bonds because the warrants, having been issued for current expenses in anticipation of the collection of taxes, do not constitute an indebtedness of the district, is no less than a vain attempt to meander about a plain constitutional protection of the taxpayer. The issuance of bonds by a school district is through legislative authority only; by the very terms of the Act under which it is sought to issue the bonds, authority to issue them is withheld.
It is not for us to suggest how school districts may escape the consequences of excess expenditures or misfortune. We are to declare the law as we find it. (Helena Water Works Co. v. Cityof Helena, supra.) It may be that hardship will result, but, if it does, as the supreme court of Illinois said in Law v.People,
If legislative assemblies or courts are permitted, under color of construction or other specious ground, to depart from that which is plainly declared as the supreme will of the people in their written Constitution, "the people may well despair of ever being able to set any boundary to the powers of the government. *546 Written constitutions will be worse than useless." (People exrel. Seeley v. May, supra.)
Let the writ issue.
ASSOCIATE JUSTICES MATTHEWS, STEWART and ANDERSON, concur.
Dissenting Opinion
I am in accord with what is said in the majority opinion as to the purpose of the constitutional provisions limiting the amount of indebtedness of school districts and other subdivisions of the state. I am unable to agree, however, with the conclusion there stated that the defendant school district has exceeded its limit of indebtedness within the meaning of section 6, Article XIII of our Constitution. It should be kept in mind, too, that this section of the Constitution does not deal with expenditures, but with indebtedness. If the present indebtedness of the defendant school district is valid, the contemplated bond issue would be also, because it is simply contemplating a change in the form of an existing indebtedness. This much must be conceded.
In effect, the majority opinion holds that outstanding warrants of the school district are invalid because issued when the district had already reached its limit of indebtedness. In my opinion the majority are in error in their method of computing the indebtedness of the school district. Taxes levied and in the process of collection are to be treated as cash on hand and to be deducted from the gross indebtedness in determining whether the district has exceeded its constitutional limit of indebtedness. The more recent cases sustain this view. The rule is stated in 44 C.J. 1124 as follows: "According to a few decisions, some of which are weakened or overturned as authorities by subsequent decisions or statutes in the same jurisdiction, a limitation of municipal indebtedness refers to outstanding debts and not net indebtedness, but it is generally held that in computing the existing indebtedness of a municipality, a deduction may be made from gross indebtedness of municipal assets applicable to the payment of such indebtedness; *547 and in some jurisdictions it is so provided by statutes which are held to be constitutional. Particular assets which may be deducted include cash on hand and solvent debts due the municipality."
Delinquent taxes should be considered as in the process of collection and are deductible. In Seymour v. Ellensburg,
The supreme court of Iowa, in Council Bluffs v. Stewart,
In 56 C.J. 538 it is said: "In computing the existing indebtedness of a school organization, there is generally deducted all of the property or assets, both real and personal, including funds in the treasury available for the payment of its liabilities. *548 This includes taxes levied which are due and collectible, in the absence of a showing that there were current expenses which would consume such taxes, money due the school district from another school district upon an adjustment of the assets and liabilities between them, but not the right of a new school board to levy a tax."
Taxes assessed and in the process of collection are constructively in the treasury. (McCavick v. Florence Ind.School District,
It cannot be said that delinquent taxes are not in the process of collection. Under our system of collecting taxes, if not paid when due, the property is sold for the delinquent taxes. If no one appears to bid on the property, it is struck off to the county. After the county obtains deed it must sell the property, in which event the school district obtains its share of the proceeds of the sale. These various steps are but proceedings in the process of collecting the delinquent tax. (State ex rel.Souders v. District Court,
The majority opinion seems to proceed upon the theory that the minute school district taxes become delinquent they are no longer an asset of the district. The legislature is not permitted to remit or release delinquent taxes or any part thereof. (Sec. 39, Art. V, Const.; Sanderson v. Bateman,
In the absence of proof to the contrary, as here, it must be assumed that the delinquent taxes will ultimately be collected, and that a tax, being a prior lien upon property, is a solvent debt. This being so, it is my opinion that, in calculating the indebtedness of the school district, such taxes must be deducted. Reason and authority support this conclusion.
If the warrants in question here are in excess of the constitutional limit of indebtedness, they are absolutely void. If *549 they are void to-day, they will be to-morrow. They cannot be void at one time and valid at another. It follows that, if the majority opinion is correct, these warrants are absolutely void. If to-morrow the school district receives $8,000 in delinquent taxes, levied to meet the obligations for which the warrants were issued, it could not lawfully pay the warrants. Such a conclusion, necessarily following from the majority opinion, seems to me preposterous.
It is true that the case of Jordan v. Andrus,
True, the Rankin Case, supra, had relation to a state indebtedness, but no amount of rationalization can justify a different meaning of the word "debt," as applied to the state from that applied to a school district. The attempt to draw a distinction between the two because of section 12, Article XII, Constitution, cannot, in my opinion, be sustained. Section 12 is not a grant of power. It confers no rights upon the state. It is simply an additional limitation upon the power of the state legislature. No such constitutional limitation has been made as to a school district. This came by way of legislative enactment. (Secs. 964 and 1012, Rev. Codes 1921.)
It is my view that defendant school district is not indebted beyond its constitutional limit, and that the writ prayed for should be denied.
Rehearing denied December 27, 1933, MR. JUSTICE ANGSTMAN dissenting.