237 Pa. 501 | Pa. | 1912
Opinion by
The Borough of Warren, incorporated by Act of April 3, 1832, P. L. 259, became subject to the General Borough Act of 1851 on March 10, 1854. The Warren Water Company, incorporated under the General Corporation Act of April 29, 1874, P. L. 73, has been furnishing water to the inhabitants of the Borough of Warren from the year 1881. On February 8, 1903, the borough and the water company entered into a written agreement for the appointment of appraisers to appraise the works, rights, franchises and property of the water company, and the appraisement so to be made was to be regarded as the value of the plant. In pursuance of said agreement appraisers were chosen and an appraisement was made, which was subsequently filed in the court below in a proceeding instituted by the borough to acquire the ownership of the plant or system of the water company. The valuation of the water plant or system, as determined by the appraisers, was $390,000, at which price the company proposed to sell and the borough to buy, the latter to issue bonds to the water company in payment for its property, in accordance with the provisions of the Act of May 31, 1907, P. L. 355, as amended by the Act of April 22, 1909, P. L. 135. The value of the taxable property in the borough at the last assessment was $4,692,545. The constitutional limit of its indebtedness is $328,478. The present indebtedness of the borough is $190,000. The bonds which it proposes to issue are to be paid solely out of the receipts and revenues to be derived from the said water works or system, “without other liability whatsoever” on the part of the said borough. The court below found that, by an ordinance duly adopted, it has made full and ample provision for the creation of a sinking fund out of the said receipts and revenues for the payment of the principal and interest of the bonds as they respectively shall mature.
When the Borough of Warren and the Warren Water Compány entered into the agreement of February 8, 1903, the former could have become the owner of the works and property of the latter under clause 7 of the 34th Section of the Act of April 29,1874, which provides that it shall be lawful, at any time after twenty years from the introduction of water into a borough in which the water company shall be located, to become the owner of the works and the property of the company by paying
Words used in the constitution are to be given their general and popular meaning, and “debt” and “indebtedness” in Section 8, Article IX, of the Constitution “are not used in any technical way, but in their proper
That the scheme by which the borough has undertaken to acquire the plant of the water company would, if carried out, result in the creation of municipal indebtedness in excess of the constitutional limit, is to be regarded as settled by what was decided in Brown v. City of Corry, 175 Pa. 528. In that case the municipality, whose indebtedness was in excess of the constitutional limit, entered into a contract to purchase water works, to be paid for by twenty annual installments out of “the current revenues of said city and not otherwise.” The contract further provided that, if the said revenues should be insufficient to meet the payments, the interest of the city in the said works should revert to the vendor, or his assigns, and the contract should be terminated. It was contended on the part of the city that the contract did not constitute a debt within the meaning of the Constitution, because the liability of the city to pay was limited to its current annual revenues, and could not be enforced by action; but it was held that this created a debt, and was, therefore, a violation of the constitutional provision prohibiting the incurring of indebtedness beyond certain prescribed limits. In so holding we approved the following, inter alia, from the opinion of the court below: “It is a debt for the purchase money, and in principle analogous to the debt for purchase money for land, for which a mortgage has been given with no accompanying personal obligation, which is universally termed a ‘mortgage debt.’ ” Courts of other jurisdictions have placed the same meaning upon “debt” or “indebtedness” prohibited by state constitutions. The Court of Appeals of New York, in Newell v. People, 7 N. Y. (3 Selden) 9, in passing upon the validity of an act of the legislature undertaking to make a loan for the state by pledging certain state revenues for its repayment, under a clause exempting the state from all liability to pay any deficiency that might arise
While some courts have sustained the contention of the appellant that the debt which it would create is not one forbiddén within the meaning of the constitution, the weight of authorities, including our own, sustains the sounder rule that the letter and spirit of constitutional restriction upon municipal indebtedness are not to be evaded by any scheme or device such as the appellant would adopt. In determining whether any legislative or municipal act conflicts with the Constitution, its substance, and not its form, must always be the test. To sanction what the appellant proposes to do would permit municipalities burdened with debt almost up to the constitutional limit, to constantly overstep it, with results easily to be conjectured. Public improvements which could not be made in the face of the Constitution would be made in defiance of it. To permit a borough or city to borrow money under a contract that it shall not be liable for its repayment, but that the lender must look solely to pledged municipal property or assets, would, in effect, annul the constitutional restriction upon municipal improvidence and strike down a safe