5 Or. 29 | Or. | 1873
By the Court,
The respondent is a municipal corporation created by the Legislature, and clothed with the usual powers of such corporations. Its charter, among other things, provides that “the mayor and aldermen shall compose the Common Council of said city * * * and shall have the exclusive power to levy and collect taxes for city purposes, not to exceed one per cent, per annum on property in said city taxable for county purposes; to make by-laws and ordinances not inconsistent with the laws of the United States, or of this State.” It further provides that “the City Council shall not in any manner create any debt or liabilities which shall singly, or in the aggregate, exceed the sum ,of one thousand dollars.” The last provision was evidently inserted in the charter by the Legislature in pursuance of -§ 5 of Art. XI of the Constitution, which provides that “Acts of the Legislative Assembly incorporating towns and
The Common Council of the city of Salem, in making the contract set out in the complaint, undertook to bind the city by present obligation to pay the Salem Water Company the sum of eighteen hundred dollars per annum, to be paid in quarterly installments for seventeen years, amounting in the aggregate to the sum of thirty thousand six hundred dollars. The demurrer interposed to the complaint admits that the contract was made and entered into between the parties as therein set out. And the main question in the case to be determined is whether the contract “in any manner creates any debt or liabilities which singly or in the aggregate exceed the sum of one thousand dollars.” If it does, it is a contract directly prohibited by the charter, and is therefore void.
The position taken by respondent is, that no tax having been levied or specific fund set apart and appropriated for the payment of those liabilities as they accrue, that it necessarily creates a debt or liability in excess of the limitation specified in the charter; while it is insisted by appellant that the promise made by the Common Council on behalf of the city to pay money for water to be furnished in the future created no debt or liability against the city, “if the amount proposed to be paid does not exceed the amount that may be raised by the tax levy for the current year.”
According to this theory the question as to whether any debt or liability was created in any manner against the city by this contract, depends wholly upon the financial condition and ability of the city to raise the amount agreed to be paid, and not upon the terms and conditions of the contract itself, or upon the further fact as to whether any provision was made for raising a fund and setting it apart to pay these liabilities as they accrue.
In other words, the theory contended for by appellant is this: If the Common Council can raise the amount proposed to be paid to this company by levying and collecting a tax of one per cent, upon all the property included within the
If this theory should be adopted, then the State may make contracts involving millions of dollars, without creating any debt or liability against the State within the prohibitory clause of the Constitution, as that instrument contains no provision limiting the ámount of percentage that may be levied upon the property of the State for the purpose of raising revenue to carry out the' various objects of the State government. The words “any debt or liabilities,” as used in the charter; are general and may include any kind of debt or liability, either absolute or contingent, express or implied. A debt exists against the city whenever it agrees to pay money in return for services performed, or, as in this case, for water furnished for the use of the city. In a popular sense, debt includes all that is due to a party under any form of obligation or promise. (3 Met. 523.)
Either of the definitions are sufficient to embrace the liability created by the contract under consideration. The moment the contract was made it created a present obligation on the part of the city to pay money to the company at future periods. Now, whether this obligation can be called a debt in the technical sense or not, it is at least a liability; that is, the city is “bound or obliged in law” to pay for the water furnished by the company.
The Eighth Article of the Constitution of the State of California provides that the Legislature shall not create any debt or liabilities in any manner which shall exceed the sum of three hundred thousand dollars, except in certain contingencies specified. A question arose upon the construction of this provision in the cases of The State of California v. McCowley (15 Cal. 455); McCowley v. Brooks (16 Cal. 24); Kloppikus v. State Capitol Commissioners (16 Cal. 253).
In the first case the question, arose upon a contract between the State and McCowley’s assignor, entered into in
In Kloppikus v. State Capitol Commissioners, the same question arose upon a contract for erecting a State Capitol, made in pursuance of the act of March 29, 1860. The commissioners were authorized by the act to contract to the extent of one hundred thousand dollars; and that amount was appropriated by the act, out of any money in the treasury not otherwise appropriated, to carry this act into effect. “This act was held not to be repugnant to the Eighth Article of the Constitution upon the • same grounds stated in The State v. McCowley.” '
This question also arose and was decided in the case of The State v. Medberry (7 Ohio St. R. 526). In.that case the Board of Public Works contracted to pay certain parties twenty-seven thousand five hundred dollars a year, payable monthly, for five years, amounting in al^to the sum of one million three hundred and seventy-five thousand dollars, for materials and repairs of the State canals. The Constitution of Ohio prohibits the General Assembly from creating any debt or liabilities against the State which shall
The opinion of the court was delivered by Mr. Justice Swan, which is a very able and well-considered opinion. After alluding to the general working of the financial system of the State, as .to the payment of current expenses, and the creation of a debt, a very clear and forcible distinction is drawn between those contracts which do and those which do not create a debt within the meaning of this constitutional restriction. The principles stated and illustrated in the opinion are very handsomely summed up by Mr. Justice Sawyer in The People v. Pacheco (27 Cal. 218), as follows: “That the legislative department of the Government is vested with the power of taxation, and the authority to determine the objects for which the taxing power shall be exercised, and to appropriate the moneys thus raised to such objects; but that the power of appropriation, under the Constitution of Ohio, is limited to two years; that when an appropriation is made for an object to be accomplished, and. paid for within the two years, and, at the same time, revenue is provided to meet the appropriation, a contract made in~pursuance of the appropriation,' and payable out of it, does not create a debt within the meaning of the prohibitory clause of the Constitution. But a contract to be performed beyond the two years, or without raising and appropriating the revenue to meet it, necessarily creates a debt, ás the services cannot be paid for when rendered in the first case, because the legislative power has no authority to make the appropriation, and, in the second, because it
The theory adopted in these cases is, that if expenses are incurred by authority of the legislative department for some specified object, without any provision being made for the payment of such expenses as they accrue, they thereby create and become a debt against the State, within the meaning of the prohibitory clause. But, on the other hand, if at the same time such expenses are authorized to be incurred, provision is made for the payment of such expenses as they accrue, and such expenses are incurred, they do not thereby become a debt against the State, because the whole is regarded as a single financial transaction. The only ease referred to in which this doctrine appears to be controverted, is that of Coulson v. The City of Portland, reported in 1 Deady, 481. Mr. Justice Deady, in delivering his opinion in the case, said: “By means of such artificial reasoning and unlooked-for constructions of popular and plain terms and phrases, Constitutions may be purged of every prohibition upon the legislative power of taxation and creating indebtedness. The fact that the ordinance appropriates money to pay these coupons, as they fall due, makes no difference. There is no magic in the legislative formula, ‘There is hereby appropriated.’”
It will be noticed that the contracts in the cases cited are very similar to the contract in the case under consideration, except that in those cases provision was made for raising and appropriating money to pay the liabilities incurred, as they became due, while in this no such provision was made.
It wül be further noticed that in Coulson v. Portland it was held that the ordinance created a debt against” the city within the meaning of the restrictive clause of the charter, notwithstanding the ordinance also contained a provision for raising and appropriating revenue in payment of the coupons as they became due, while in all the other cases it was held that the provision made for raising and appropriating revenue, in payment of the liabilities, as they became due, operated to prevent the existence of a debt against the State, within the meaning of the constitutional restrictions,
But in the case under consideration no suifii provision was made; therefore, we do not undertake to decide at present what would have been the effect upon the liability created by the ordinance in question if such provision had been made for meeting such liabilities as they became due.
As to the prohibitory clause of the charter, its object was to compel the Common Council to conduct the financial operations of the city upon á cash basis, and thus prevent its present and future resources from being incumbered and pledged for a city debt in any sum greater than the amount mentioned in the limitation.
And, as in our opinion the ordinance upon which this action is based did create a liability against the city which exceeds the limitation, it must be regarded as a contract directly prohibited by the charter, and therefore void.
Judgment affirmed.