167 A. 882 | Pa. | 1933
Lead Opinion
Mr. Justice MAXEY filed a dissenting opinion. *290
Argued January 23, 1933, reargued May 25, 1933. Maidencreek Township, a township of the second class, on August 23, 1921, borrowed $6,000 for use in permanently improving a state aid road. It gave its note to the First National Bank of Leesport, which was renewed on November 29, 1921, and from time to time thereafter until July 20, 1930, from which date it remains due.
The property assessment within the township for tax purposes in 1921 was $1,266,378, and the debt is conceded to be within the two per cent constitutional limit.
Later on, in 1928, the township purchased a truck, and gave to the bank its note for $6,000. In that year and the following, 1929, the township paid on account of this note $3,000, leaving a balance due of $3,000. The bank thereafter applied money of the township on deposit in payment of the above balance. *291
At no time was the two per cent constitutional limit on indebtedness without the approval of the electors exceeded. No tax was levied at or before the time the foregoing transactions took place to provide for payment of the indebtedness.
On August 9, 1930, the Supervisors, by resolution, levied a tax to pay the $6,000 and $3,000 notes, authorizing the issuance of a new note in the sum of $9,000 as a "collateral" note.
The Secretary of Internal Affairs in accordance with the Act of 1927, P. L. 9, and its supplement of 1929, P. L. 516, approved the note. The $9,000 collateral note was then delivered to the bank; a tax was levied to pay the note as will later appear.
A taxpayer's bill was filed to enjoin the township from paying any part of the $9,000 indebtedness. After hearing, the court below ordered the bank to repay the amount retained by it in payment of the 1928 note and declared that debt void. It also held that the note evidencing the indebtedness of 1921 was illegal and void, and constituted no valid obligation of the township. From this decree the bank has appealed.
In Georges Twp. v. Union Trust Co.,
The court below found that the purposes for which these loans were created, the permanent improvement of highways, and the purchase of equipment (the truck) for use in making and repairing the roads, were lawful: Act of July 14, 1917, P. L. 840, chapter VII, article I, section 381, clause VIII; Act of April 10, 1929, P. L. 470, section 1. However, it is not building of road or purchasing a truck that is here in controversy: it is the validity of the debts by which these purposes were accomplished that is in question.
The power of a second-class township to borrow money is found in the township code and other statutes, and is limited and regulated by the Constitution. Appellee contends that the notes are void under section 10, article IX, of the Constitution and the legislation enacted in conformity therewith. It reads as follows: "Any county, township, school district or other municipality incurring any indebtedness, shall, at or before the time of so doing, provide for the collection of an annual tax sufficient to pay the interest and also the principal thereof within thirty years." It is appellees' contention thatat or before any debt may be incurred (money borrowed by note or bond) an annual tax sufficient to pay the loan or debt within 30 years must be provided for, and that of course can only be done by a tax levy which does not in terms appear, and if the annual tax has not been provided for by the levying of some millage or amount the loan is void; that the municipality cannot later cure it no matter if such curing process be undertaken a day or nine years later. Such construction challenges the validity of many municipal bonds as well as loans and we are of opinion that it is a too drastic interpretation of the constitutional provision as to a procedural matter.
The Constitution does not grant the power to a municipality to incur indebtedness; the power comes from the *293
legislature; it is limited by section 8, of article IX, and regulated by section 10. The latter is a command to the township to provide, by the method therein specified, funds for the payment of an indebtedness, which the legislature authorized within the limitation of the Constitution. The municipality's power is not therein affected, but rather its mode of exercise. The words "at or before" are mandatory, but there is no provision stating that any indebtedness of the city shall be void if such a tax is not provided at or before the incurring thereof. The section is an explicit and express command to subdivisions of government to perform a duty, a duty which may be enforced by mandamus: Com. ex rel. Hamilton v. The Select and Common Councils of Pittsburgh,
The Act of 1874, P. L. 65, supplemented by the Act of 1915, was enacted to enforce the mandate of the Constitution: Campbell v. Wilkins Twp.,
The debt of the township, however, was a lawful one and the money borrowed was applied to a proper purpose: Boro. of Rainsburg v. Fyan,
"But one requisite is lacking. The Act of 1874, section 2, provides inter alia, that the statement to be filed shall show 'the amount of the annual tax levied and assessed to pay the said indebtedness.' As no annual tax was levied before or at the time of incurring the indebtedness, and no provision was made for the collection of an annual tax sufficient to pay the interest, and also the principal thereof within thirty years, the plaintiff, on inquiry made, and he was thrown upon inquiry, would necessarily learn that this was not done.
"The Constitution, article IX, section 10, provides [see above].
"The plaintiff in the absence of a statement . . . . . . must be taken to have known that the . . . . . . Constitution, and the . . . . . . Act of April 20, 1874, were not complied with in this regard. It follows, therefore, that the bonds were issued without authority, in contravention of the Constitution and the law, and hence there can be no recovery on the bonds.
"It is, however, not required that the statement, etc., be filed before incurring a lawful debt, but that it be filed before issuing bonds as security therefor. In this case the debt was a lawful debt, and less than two per cent. . . . . .
"We are clearly of the opinion, therefore, that though the bonds are void, yet the debt which they were intended to secure was and is a lawful debt, recoverable by suit on the contract. . . . . ." *296
In Long v. Lemoyne Boro.,
The Board of Supervisors recognized the existence and justness of the indebtedness, and, on August 9, 1930, by resolution acknowledged that the money received had been expended for purposes of the township. The resolution authorized the issuance of a note of $9,000, bearing 6% interest per annum, payable in installments as follows:
"Sept. 6, 1930 Principal $2,000.00 interest $91.97 for which funds are provided for June 6, 1931 Principal $2,000.00 interest $315.00 June 6, 1932 " 3,000.00 " 300.00 June 6, 1933 " 2,000.00 " 120.00"
They further did what should have been done when they received the money, levied a tax for its payment. *297
Section 5 of this resolution levied and assessed an annual property tax to provide the revenue to meet the installments as they fell due. The Court of Quarter Sessions of Berks County had previously, on March 12, 1930, on the petition of the supervisors, allowed a levy of 13 mills for road taxes with the express stipulation that $3,000 of the anticipated increase in the revenue of $4,200 be paid to satisfy these existing debts.
While the $9,000 note was issued to the bank as a collateral note to secure a valid indebtedness evidenced by invalid notes, we are unable to discover any defect in the procedure that supports the collateral note. A valid indebtedness existed. The township recognized this and in compliance with the Constitution and statutes issued valid evidence of its debt. That it called the note "a collateral note" cannot affect its legal force. If it is a collateral note for a lawfully existing debt, its holder may recover on it. The bank is in the same position it would have been had no note ever been issued prior to this one for $9,000, but a valid indebtedness had been kept alive by the payment of interest. It was issued with all the formalities and in accordance with all the requirements of the law. Upon it recovery may be had. We can see nothing which prevents their acts from having their intended effect: School Dist. v. Lamprecht Bros. Co.,
If we were to hold strictly to the line of appellees' contention, then our decision in Rettinger v. Pittsburgh School Board,
With regard to the purchase of the truck in 1928, it was a current expense and was authorized by section 420 of the Township Act of 1917. The purchase was approved by the Secretary of Highways, and it was not necessary to submit it to the Secretary of Internal Affairs for approval. After a careful summary of this record, we conclude that the indebtedness incurred in the purchase of the truck is a valid one and within anticipated revenues. The bank was within its rights in charging against the township's funds in its possession the amount of $3,201 as it did.
The decree of the court below is reversed, with costs to be paid by Maiden Creek Township.
Dissenting Opinion
The organic law of this State, article IX, section 10, of the Constitution lays down the following unambiguous limitation on the power of the state's municipal agents to incur indebtedness: "Any county, township, school district or other municipality incurring any indebtedness shall, at or before the time of so doing, provide for the collection of an annual tax sufficient to pay the interest and also the principal thereof within thirty years." This imposes on municipalities a "Pay-as-you-go" policy, except when the payment of the indebtedness is provided for within thirty years in the manner just stated. The force and mandatory quality of this provision of the Constitution have been again and again recognized by this court. *299
In Addystone Pipe and Steel Co. v. City of Corry,
In Campbell v. Wilkins Twp. et al.,
This Act of April 28, 1915, supra, provides in section 2 that: "Any county, city, borough, school district, township of the second class, or other municipality or incorporated district, may incur debt or increase its indebtedness to an amount in the aggregate not exceeding two per centum upon the assessed value of the taxable property therein, as fixed and determined by the last preceding assessed value thereof; and the corporate authorities of such municipality may, by a vote thereof, duly recorded upon its minutes, authorize and direct the *301 incurring or the increase of such debt to the amount aforesaid; and may issue coupon bonds or other securities therefor, in sums not less than one hundred dollars each, bearing interest at a rate not exceeding six per centum per annum, payable semiannually, and the principal thereof reimbursable at a period not exceeding thirty years from the date at which the same is authorized; and an annual tax, commencing the first year after such debt shall be increased or incurred, sufficient for the payment of the interest thereon, and the principal of such debt within a period not exceeding thirty years from the date of such increase, shall be forthwith assessed." This section further provides that before issuing any such obligation or security, it shall be the duty of the principal officer or officers of the municipality or incorporated district to prepare a statement showing the actual indebtedness of such district, the amount of the last preceding assessed valuation of the taxable property therein, the amount of the debt to be incurred, the form, number and date of maturity of the obligations to be issued therefor. This statement must be sworn to and filed in the office of the clerk of the court of quarter sessions.
In Georges Twp. v. Union Trust Co.,
What Maidencreek Township attempted to do in this case now before us comes squarely within the prohibition of the constitutional mandate quoted. Under a long and consistent line of decisions handed down by this court the debt should be declared void. Dillon on Municipal Corporations, 5th ed., volume I, section 211, page 418, is cited in the majority opinion. Only part of section 211 is quoted, however. As I read this entire section, I interpret it as opposed to the position taken by the majority opinion. In the excerpt from Dillon quoted in the majority opinion six dots indicating an omission appear in the fourth line of the quotation. The clause omitted reads as follows: "That no indebtedness can be incurred without a substantial compliance with their requirements [i. e., the requirements of constitutional provisions], and that contracts made, and bonds and other evidences of indebtedness issued, in violation of their terms are invalid, and, if there be no estoppel, cannot be enforced." Where the six dots appear in the last part of the quotation cited in the majority opinion, indicating an omission, I find, inter alia, the following from Dillon: "Under this provision of the Constitution no municipal corporation can incur debt without legislative authority, express or implied; but the grant of such legislative authority carries with it the constitutional obligation on the part of the municipality to levy and collect a sufficient annual tax to pay the interest as it matures and the principal within the prescribed term of years. . . . . . . The provision required by the Constitution means such fixed and definite provision for the levying and collecting of the required tax as will become a legal right in favor of the holder of bonds issued thereon, or in favor of any person to whom such debt may be payable. But the provision of the Constitution is sufficiently complied with if the statute which confers authority upon the municipality to incur the debt directs that an annual tax shall be levied sufficient to pay the interest on and create a sinking fund for the redemption of the bonds." Dillon *303 makes it very plain that no valid debt can be incurred by a municipality unless either the municipality itself makes provision for the levy of taxes, or that there be a direction in the enabling or other statute that a sufficient tax be levied to take care of the indebtedness.
McQuillin on Municipal Corporations, 2d ed., volume 6, is likewise an authority who sustains the court below and is opposed to the position taken in the majority opinion. McQuillin says in section 2365, after quoting the constitutional provision referred to: "Such a constitutional provision precludes the incurring of further indebtedness for any purpose, including pressing wants, during the current year, after the income and revenues for that year have been exhausted; except that certain indebtedness is sometimes expressly excepted by the Constitution from the operation of such a provision." McQuillin, section 2364: "Constitutional limitations on indebtedness [of municipalities] are construed as prohibitory, self-enforcing, and are to be observed strictly." McQuillin, section 2365: "The purpose of these provisions is to compel municipalities to adopt the safe, sane and conservative plan of pay-as-you-go; and that each year's income and revenue must pay each year's indebtedness and liability, and that no indebtedness or liability, incurred in any one year, shall be paid out of the income or revenue of any future year."
I can find no instance heretofore where this court has ever ruled that a constitutional restriction on the power of a municipality to incur a debt could be ignored if the purpose to be served by the debt was legal. In the majority opinion appears the following: "The purpose of the indebtedness having been legal, the constitutional provision limiting the amount of indebtedness not having been violated, although the township failed to follow the prescribed regulation to make the evidence of indebtedness valid, the one furnishing the money to the municipality is not to lose by this neglect, nor is the township to profit. The party so lending the money is *304
entitled to recover in assumpsit, formerly on a common count for money had and received: Boro. of Rainsburg v. Fyan,
In this Rainsburg Boro. case the action was one of assumpsit for interest on bonds. The Act of April 20, 1874, P. L. 65, provides that before issuing any bonds, a statement must be prepared and filed by the principal officer of the municipality in the office of the clerk of the court of quarter sessions, showing the last preceding valuation, the amount of debt to be incurred, the form and date of maturity of the obligations to be issued therefor, the amount of annual tax levied and assessed to pay the indebtedness. The court held, as appears from the excerpt first quoted, that there was no actualincrease in the borough's indebtedness, and therefore thepayment of the $500 interest did not involve a breach ofarticle IX, section 10, of the Constitution. The judgment was affirmed per curiam. *305
In Long v. Lemoyne Boro.,
The case of Aspinwall-Delafield Co. v. Aspinwall Boro.,
The action of the Board of Supervisors of Maidencreek Township on August 9, 1930, nine and two years, respectively, after they attempted to incur the debts in question *306 contrary to the constitutional provisions, does not help appellant's case in the slightest degree. To sanction the attempted validation by the action of the supervisors in 1930 of the debts they illegally incurred in 1921 and 1928, respectively, would be to countenance an attempted circumvention of the Constitution. When a second-class township is not able to manage its fiscal affairs on a "pay-as-you-go" basis and is therefore obliged to incur an indebtedness, the Constitution in article IX, section 10, tells that municipality in language so clear that no doubtful meaning can be read into it, that it "shall at or before the time of so doing," i. e., "incurring any indebtedness" "provide for the collection of an annual tax sufficient to pay the interest and also the principal thereof within thirty years." Instead of obeying this constitutional behest and providing at or before the time of incurring the indebtedness for the collection of an annual tax sufficient to pay the debt in thirty years, the township supervisors waited nine years before providing for the collection of an annual tax with which to discharge the indebtedness. For nine years it saddled "a floating debt" on the municipality and this is one thing the Constitution says cannot be done lawfully. The bank is in effect asking us to write into section 10, of article IX, of the Constitution after the phrase "at or before the time of so doing," the additional phrase "or within nine years thereafter." The answer to that is that this court has no authority to amend the Constitution.
It is true that there have been cases in Pennsylvania where municipal debts illegally contracted have been ratified by theelectors. These are cases where there is applied the rule that a principal may ratify the acts of its agents. We had such a case in Bell v. Waynesboro Boro.,
This court in Southmont Boro. v. Upper Yoder Twp.,
In the instant case there is not alleged any electoral ratification of the acts of the supervisors; in fact, there is no provision in the Constitution giving even electors power to ratify such debt increasing acts as are herein challenged. What the court is now confronted with is an attempt on the part of the township supervisors to ratify their own illegal acts — and what I think the supervisors are confronted with is the Constitution (section 10, article IX). "The power of ratification did not lie with the supervisors," FIELD, J., in Marsh v. Fulton Co.,
The case of Schilling, for use of First Nat. Bank v. Ohio Twp.,
Potters Nat. Bank of East Liverpool, Ohio, v. Ohio Twp.,
Lancaster City School Dist. v. Lamprecht Bros. Co.,
In Keller v. Scranton,
In Jackson v. Conneautville Boro. School Dist.,
The approval by the Department of Internal Affairs of the execution of the note for $9,000, dated June 6, 1930, as "collateral security" for the notes of $6,000 and $3,000 in no degree cures the invalidity of the indebtedness in question. Section 2 of the Act of March 31, 1927, P. L. 91, making it the duty of the Department of Internal Affairs "to carefully examine all proceedings had by the several municipalities of this Commonwealth for the incurring or increasing of the indebtedness thereof, and to ascertain whether the proposed debt is within the limitations imposed by the Constitution and whether such proceedings are in conformity with existing laws" merely clothes that department with certain supervisory powers over municipalities. The act was not intended to establish the doctrine of the infallibility of the Secretary of Internal Affairs on questions pertaining to the constitutionality and legality of municipal debts. The following succinct statement made by President Judge SCHAEFFER on this phase of the case in the discussion filed with his decision cannot be improved upon: "There is no warrant or authority in law for the Secretary of Internal Affairs, years after debts are illegally incurred, to validate them and make them legal obligations of the municipalities. The Act of 1927 is a regulation of the manner in which municipalities may incur indebtedness; *311
it cannot be construed as making valid debts which are illegal because the provisions of the act were not complied with. See Falkinburg v. Venango Twp.,
In appellant's supplemental brief the bank invokes the validating Act of June 23, 1931, P. L. 1181, and contends that this act removes any possible doubt that might possibly arise as to the note's validity. The question raised in this supplemental brief is nowhere referred to in the pleadings or in the statement of questions involved. This court has repeatedly held that only those questions included in the statement of "questions involved" need be considered on appeal. This rule was recently reiterated in Phillips v. American Liability Surety Co.,
The validating Act of 1931 specifically excepts from its application "any indebtedness of any township . . . . . . which violates any restriction imposed by any provision of the Constitution. . . . . ." This act requires little discussion for under no interpretation can it nullify the Constitution. The indebtedness challenged is invalid because the conditions which section 10, of article IX, imposed as precedent to incurring it were not complied with. Therefore, no statute can save it. The Constitution is not subject to amendment either by the judiciary or by the legislature.
I would affirm the decree of the court below.