Kiichli v. Minnesota Brush Electric Co.

58 Minn. 418 | Minn. | 1894

Canty, J.

Plaintiff brought this action against the Brush Electric Light Company and the city of Minneapolis and certain of its officers. He alleges in his complaint that he is a resident and taxpayer of said city; that on August 6, 1892, the city and the electric company entered into a-pretended contract whereby the company agreed to provide certain lamps and electric light service to be used in lighting the streets, and whereby the city agreed to pay for the same at certain specified rates, the contract to continue for the period of five years from and after January 1, 1893; that both parties have since been acting under and performing said contract, and that the city is paying for such sendee much more than it is worth, and threatens to, and if not restrained will, continue to perform such contract during the balance of said five years, and will pay out for such service during said time at least $200,000 more than the reasonable cost and expense thereof, — and prays that an injunction issue, restraining the further payment of any public funds upon said contract.

The electric company appeals from an order overruling its demurrer to this complaint on the ground that it does not state a cause of action. In overruling the demurrer the court below held that the city has no power, under its charter, to make a contract for five years for lighting the streets.

The charter, Sp. Laws 1881, ch. 76, Subch. 1, § 1, provides that the city “shall be capable of contracting and being contracted with; and shall have all the general powers possessed by municipal corporations at common law.”

Subch. 4, § 5, subd. 11, gives the city power “to erect lamps and provide for lighting the city * * * and to create, alter and extend lamp districts.”

Subch. 5, § 7, as amended by Sp. Laws 1887, ch. 15, § 16, provides that the fiscal year shall commence on the 1st day of January in each year.

The general statute provides that the state board of equalization shall meet on the first Tuesday in September of each year to equalize the assessments in the different counties, cities, etc.

Subcb. 5, § 8, of said charter provides that when such board shall have completed its adjustment of the assessment of the taxable property in said city, the city, comptroller shall report to the city council a computation of a rate of tax levy which with the amount of revenue received by the city for the last year reported as aforesaid and applicable to the current expenses of the city, shall be sufficient to defray the current expenses of the city for the next fiscal year.

Section 10 of Subch. 5, as amended by Sp. Laws 1887, ch. 15, § 4, reads as follows:

“Sec. 10. After the making of the reports of the city comptroller, provided for in section eight (8) hereof, the city council shall levy such tax on all the taxable property in said city as it shall deem necessary, in addition to the other revenue of the city applicable thereto, to defray the current expenses of the city for the next fiscal year, but no such taxes for such current expenses shall in any year amount to more than six-tenths (V10) of one per cent, of the assessed valuation. Prior to the levying such tax to defray the current expenses. of the city for the next fiscal year, said city council shall, by resolution appropriate a certain sum of money for the expenses of each department of the city government, which is to be paid out of said current expenses fund, and no more money than thus appropriated shall be expended for any fiscal year for any such department of the city government.

Section 11 of subch. 5, as amended by Sp. Laws 1889, ch. 33, § 4, reads as follows:

“Sec. 11. The city comptroller shall, as soon as may be after the first (1st) Monday in January of each year, make report to the city council of the actual expenses of the city for the first quarter of the then current fiscal year, the amount of taxes collected and outstanding and of the revenues received from other sources, and if, upon the making of such report, it shall appear that the current expenses for such quarter have exceeded the estimates upon which the tax levy therefor was based, or that the revenues of said city are likely to fall short of their estimated amount at the time of making such tax levy, the city council shall forthwith proceed to reduce the current expenses of said city in such manner as may be deemed advisable, and for that purpose may diminish the amount of service for lighting streets, reduce the force or number of men employed in the several departments of the city, except the fire department, but in the discharge of such employees, said city council so far as may be, shall provide that such discharge shall be operative only during the summer months of the year. In all future contracts for lighting streets the right of the city to reduce the amount of the service on account of deficiency of revenue shall be reserved.”

Sections 18 and 14 provide for the payment of interest on the bonded indebtedness and the creation of a sinking fund.

Section 15 of this Subchapter 5 provides that bonds shall be paid out of this sinking fund as they mature, and, if there is not sufficient of that fund to pay the same, empowers the city council to issue new bonds to such an amount as may be necessary to meet the deficiency. It then provides: “But neither said city council nor any officer or officers of said city shall otherwise without special authority of law, have authority to issue any bonds, or create any debt or any liabilities against said city in excess of the amount of revenue actually levied and applicable to the payment of such liabilities

All of said sections, from 7 to 15, in said subchapter 5, relate to the finances of the city; are connected, and to be read together. It seems to be a carefully devised scheme to compel the city to ascertain with reasonable care, in advance of the tax levy, what the income will be, and to live within that income. It clearly prohibits the anticipating of any future revenue, except that for which the tax is actually levied at the time the liability is incurred. It is unnecessary to notice, step by step, the limitations to be found in these sections. They constitute a system of checks and limitations on the creation of debt and the incurring of liability, which wind up by depriving the city council of the power, “without special authority of law,” to “create any debt or any liabilities against said city, in excess of the amount of revenue actually levied and applicable to the payment of such liabilities.”

It is urged that making a contract this year, to be performed in part this year, in part next year, and in part the year after, and paid for only as performed, is not incurring liability at the time the contract is made, as the tax will be levied before the debt is created; that is, before the liability matures. To^this it may be answered that a liability is incurred when the contract is made. The point here involved is disposed of in the cases of Johnston v. Board of Com’rs Becker Co., 27 Minn. 64, (6 N. W. 411,) and Rogers v. La Sueur Co., 57 Minn. 434, (59 N. W. 488,) where the court held that a liability was incurred when the contract was made, though not to be performed, or the performance paid for, until after the taxes of subsequent years would be available to pay it. There the county commissioners were limited in incurring liability to the maximum amount which could be levied in one year according to the tax lists then on file. Here the limitation is more stringent. It limits the city council, in incurring liability, to the amount of the tax “actually levied” at the time the liability is incurred.

It is true that there is at the end of said section 11 the following-clause: “In all future contracts for lighting the streets the right of the city to reduce the amount of the service on account of the deficiency of revenue shall be reserved.” If this provision stood alone, it would be entitled to considerable weight, as implying a right to make such time contracts for street lighting; but it does not stand alone, and, in the connection in which it is used, cannot be so interpreted.

Section 10 provides for limiting absolutely, before the tax levy, the expense of each department for the next fiscal year. Section 11 provides for contracting this limit still more, after the first quarter, “if the current expenses for that quarter have exceeded the estimates upon which the tax levy therefor was based,” and provides for cutting down expenses in different ways, including the diminishing of the light service. Then follows the clause above quoted. This clause follows a limitation upon a limitation, for the purpose of giving effect to those limitations, and cannot be held, in such a connection, to give by implication the right to make such time contracts. Besides, section 15 prohibits the making of any contract, whereby liability is incurred, exceeding the revenues of the fiscal year, “without special authority of law.” Mere implied authority is not sufficient.

- The conclusion arrived at is further strengthened by a consideration of other provisions of the charter. Thus, subch. 4, § 5, subd. 44, empowers the city council to make five-year contracts for the removal of garbage; and contracts for three years for street sprinkling are permitted by subch. 8, § 17.

The complaint nowhere alleges what funds were or were not applicable to the payment of the liability incurred by this contract at the time the contract was made. The complaint does not state what funds were then on hand, or what amount of tax was then levied, or what amount of funds would be realized from other sources, or what the total amount of all such funds would be for that fiscal year, applicable to such liability. For this reason it is urged by appellant that the complaint does not 'state a cause of action. We cannot agree with counsel. The charter specifies a number of purposes for which revenue shall be raised. The only other power given to the city council to raise revenue is to levy such tax as it shall deem necessary, with the other sources of revenue, to meet the current expenses of the next fiscal year. Under these provisions it would be a violation of the duty of the city authorities to levy a tax this year to be applied to the payment of the current expenses of two, three or four years to come. Neither would they be justified in setting aside funds now on hand to be applied in payment of such current expenses for such years to come, and then proceeding to levy a tax to meet next year’s current expenses, to which thp funds on hand should be applied.

It seems to us that we cannot hold this contract valid on its face unless we can presume that the funds on hand, and the taxes actually levied, when the contract was made, were sufficient to cover all the liability incurred by this contract (payable during the next five years), and also to cover the current expenses and other existing liabilities of the fiscal year for which such taxes were levied. We are of the opinion that under the limitations on raising and accumulating revenue, both express and implied, in this charter, we cannot make this presumption.

The order appealed from should be affirmed. So ordered.

Buck, J., absent, sick, took no part.

(Opinion published 59 N. W. 1088.)