163 Ind. 69 | Ind. | 1904
Appellants, resident taxpayers of the town of Waterloo, brought this action to enjoin the board of trustees of said town from issuing the bonds of said town to pajy
It appears from this special finding: That the assessed valuation of the property in the town of Waterloo for “state and county taxes” in 1901 was $385,000; the population was 1,244, and the indebtedness of said town was $1,600. Said town could not construct a water-works and electric light plant for the town, for the reason that said town had not sufficient money for that purpose, and could not borrow' the money to construct the same without creating an indebtedness exceeding the constitutional limit, all of which was known to appellees; that the board of trustees of the town of Waterloo, desiring to secure for said town and the inhabitants thereof a supply of water and electric light for lighting the streets of said town, consulted with the president of the Olds Construction Company of Et. Wayne, Indiana, which company was engaged in the business of erecting water and light plants for cities and towns and private corporations, in regard to the way to procure the same. He represented to said board of trustees that a combined water and light plant could be put up for said town for about $21,000,- using the grounds and buildings of the town hall and fire engine room belonging to said town for the location of said plant. He also suggested to said .board that a company be organized in which the town should take stock to an amount not exceeding the constitutional limit; that said company should issue its negotiable bonds, in the sum of $17,000, with six per cent, interest, running a series of years; that said town should levy-and collect electric light and water-works taxes as provided by law, and pay the same to a trustee for the bondholders, and that a part of the moneys so paid to such trustee should be used im
On September 16, 1901, said board of trustees received two bids for the construction of said plant, and said hoard awarded the contract to the Olcls Construction Company, whose hid was as follows: “Et. Wayne, Indiana, September 16, 1901. To the Honorable Board of Trusteesi, Town of Waterloo, Indiana. Gentlemen: If granted a franchise to be drawn in the form usual in such cases, we will construct in the town of Waterloo, a water-works and electric light plant in strict accordance with the plans and specifications now on file in the office of the town clerk, and under your supervision and to your approval, for the sum of $21,195. It is understood and agreed that the town board shall lease or sell sufficient ground for the boiler house and space in the town hall for the machinery as shown in the drawings now on file. And the town shall rent not less than fourteen hydrants and twenty-three arc lights for the term and at the price stipulated in the franchise. The town shall also subscribe $6,000 to the capital stock of the company which shall come into possession of the plant. Very truly yours.” Sigued by the Olds Construction Company.
At the time of awarding said contract said hoard of trustees directed the president of said construction company to have a company incorporated and ordinances prepared for the purpose of carrying out the plans he had explained to said board, as heretofore stated. Thereafter, said president caused duplicate articles of incorporation of the Waterloo Water Company to he prepared, signed, acknowledged, and filed as provided in §5051 Bums 1901, §3851
The second section of said ordinance granted the right to occupy and use the ground and building upon which the town hall and fire engine room were situate, for constructing, maintaining, and operating thereon said water and Right plants for the term of fifty years, with a provision that all the buildings and machinery erected or placed on said grounds should be considered personal property and in no case to become fixtures or regarded as real estate. The number of joumps, their capacity, the length of the water'
Section three provided that said water-works should be fully completed on or before May 1, 1902, with a condition as to strikes, etc.
By section five it was provided that the water company should furnish and maintain not less than fourteen hydrants, which the town agreed to rent during said period of fifty years, and to pay therefor to said water company, its. successors and assigns, an annual hydrant rental of $1,350, payable in two equal semiannual instalments, fixing the time, and that for all hydrants in excess of fourteen the town agreed to pay $60 each, payable as the other hydrant rentals. “And to the payment of the said rentals during the whole of the period of fifty years at the times and in the manner hereinbefore specified, the faith and credit of the said town of Waterloo is hereby irrevocably pledged to the said Waterloo Water Company, its successors and assigns. Provided, however, that should the said Waterloo Water Company, its successors and assigns, issue its mortgage bonds as-hereafter authorized, so much of the said hydrant rentals as will be required to pay the semiannual interest on said mortgage bonds and provide a sinking fund for the payment of the principal of said bonds when the same become due, shall be set apart as a special fund by said town of Waterloo, and shall be payable by said town of Waterloo to the Et. Wayne Trust Company, trustee, in trust and confidence on the express trust that said trustee shall pay the same in discharge of the interest and principal of the said bonds, to the holders of said bonds, at the time and place where the interest and principal of ¡§aid bonds, by their terms, are made payable, and said hy
Section six, omitting the part left out when said section was amended by the board of trustees after this suit w'as commenced, was as follows: “The hydrant rentals referred to in section five of this ordinance shall be payable out of the taxes to be raised by the said town of Waterloo from year to year, and said town of Waterloo shall, and it hereby agrees, annually, during said term of fifty years, to levy and collect a tax upon all taxable property of said town sufficient to pay said hydrant rentals, and it is hereby ordered by said board of trustees of said town that such tax shall be levied and collected from year to year in the manner prescribed by law, and when levied and collected is hereby irrevocably pledged to the payment of said rentals, * * * provided, however, that said town shall not be obliged to levy or collect any special tax in excess of the amount now authorized by law for that purpose, unless the said town shall be authorized to levy and collect a greater tax. And the town further agrees, in case such special tax shall be insufficient to pay the hydrant rentals from year to year as herein agreed, that it will levy and collect with its general taxes, sufficient sums of money to pay all of the said hydrant rentals as aforesaid; but it is nevertheless provided that no understanding or obligation of the town herein shall create any debt of the town within the meaning of the term- as used in the- provision of the Constitution which limits the power of -towns to incur indebtedness, and -if for any cause there shall not be sufficient moneys in the treasury of the town applicable to the payment of the said rentals, to pay the same as they become payable according to the foregoing provisions, then the payment thereof shall be postponed until there shall be such moneys in the treas
By section seven the Waterloo Water Company was authorized to issue the first mortgage bonds of said company to an amount not to exceed $17,500, bearing interest at the rate of six per cent, per annum, payable semiannually, and to secure said bonds by a first mortgage on said plant and all its property and franchises, including all contracts entered into by it, including the grant of said town; this authority being given to enable said water company “to provide a portion of the funds wherewith to construct, erect, equip, and complete said water-works plant and system.”
Other sections provided a maximum rate for water furnished to private consumers, authorized the water company to make and enforce reasonable rules, and appoint a superintendent to represent the town in the construction of said system, and provided that the water company should not be liable for the salary paid or agreed to be paid to such superintendent.
.Ordinance No. 6 authorized the president of the board of trustees of said town to subscribe for 220 shares of the capital stock of said Waterloo Water Company, at the par value of $5,500, and to represent the town at any meetings of the stockholders of said water company, and to vote said stock at such meetings. Said ordinance provided for the issuance of eleven bonds of said town for $500 each, dated November, 1902, payable twenty years after date, and bearing interest at the rate of six per cent, per annum, payable semiannually, the proceeds of said bonds to be applied only to the payment of the stock so subscribed in said water company.
After the passage of said ordinance Mo. 6, the president of the board of trustees of said town, for said town, subscribed for 220 shares of the capital stock of said water company, as directed by said ordinance. Mone of the capital stock of said water company has been subscribed for except the three shares taken by said three incorporators, and the 220 shares taken by said town, nor is it the inten
On February 11, 1902, the board of trustees of said town passed two ordinances amending said ordinances No. 5 and No. 7, by which the franchise for water-works and the period for which the town was to rent hydrants were changed from fifty years to twenty-five years, and the number of. hydrants to be rented by the town w'as changed from fourteen to fifteen, and it was provided that “said rentals are to be paid only in case a sufficient and wholesome supply of water is furnished by said Waterloo Water Company, its successors and assigns, to said town and its citizens through the hydrants herein referred to and through such other hydrants as may be placed.from time to time.” By said ordinances amending said ordinances No. 5 and No. 7, the amount for which the Waterloo Water Company was au
At the commencement of this action, on October 19, 1901, no written contract had been made between the Waterloo Water Company and the Olds Construction Company for the construction of the water and light plant; all proceedings under said ordinances No. 5 and No. 7 having been suspended upon the commencement of this suit. At the time of the trial of this cause, in March, 1902, the bonds of the town authorized by ordinaxxce six had not been
It was found that “in adopting the several, ordinances heretofore found, and in taking the other steps in relation to the establishment of the water and light system in.said town, there was no fraud on the part of any of the parties to the action.” The court stated as a conclusion of law “that the plaintiffs in this case are not entitled to an injunction and the relief asked.” There being no finding that said ordinances Ro. 5 and Ro. 7, and the ordinances amending the same, each of which was to take effect thirty days •after its passage, on certain conditions mentioned therein, were not published as required by the sixteenth subdivision of §4-357 Burns 1901, Acts 1879, p. 201 (Meyer v. Town of Boonville (1903), 162 Ind. 165), w© assume that publication was made thereof as required by said subdivision sixteen.
Article 13 of the Constitution of this State provides that “Ro political or municipal corporation in this State shall ever be indebted, in any manner or for any purpose, to an amount in the aggregate exceeding two per centum on the value of the taxable property within such corporation,, 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 such corporation, shall be void.” This article amending the Constitution was “agreed to” by the legislatures of 1877 and 1879, and was adopted by the people in March, 1881. It was suggested in City of Valparaiso v. Gardner (1884), 97 Ind. 1, 9, 10, 49 Am. Rep. 416, and in City of Laporte
It is contended by appellants: (1) That the special findings show' that the transaction, as a whole, was a scheme to evade said article 13 of the Constitution by means of a dummy corporation. Earles v. Wells (1896), 94 Wis. 285, 68 N. W. 964, 59 Am. St. 885; Hebard v. Ashland County (1882), 55 Wis. 145, 12 N. W. 437; Reynolds v. City of Waterville (1898), 92 Me. 292, 42 Alt. 553; Brown v. City of Corry (1896), 175 Pa. St. 528, 34 Atl. 854; Nelson v. City of Chicago (1902), 196 Ill. 390, 63 N. E. 738; City of Joliet v. Alexander (1902), 194 Ill. 457, 62 N. E. 861; Culbertson v. City of Fulton (1888), 127 Ill. 30, 18 N. E. 781; City of Springfield v. Edwards (1877), 84 Ill. 626; Hall v. City of Cedar Rapids (1901), 115 Iowa 199, 88 N. W. 448; Windsor v. City of Des Moines (1900), 110 Iowa 175, 81 El. W. 476, 80 Am. St. 280; Orvis v. Board, etc. (1893), 88 Iowa 674, 56 N. W. 294, 45 Am. St. 252; Ironwood Water-Works Co. v. City of Ironwood (1894), 99 Mich. 454, 58 N. W. 371; Mayor, etc., v. Gill (1869), 31 Md. 375; Newell v. People,
Incorporated towns have authority to contract for water for public use, and for the lighting of the streets, alleys, and other public places in said towns with electric light. §4393a Burns 1901 (Acts 1897, p. 263); §4301 Burns 1901 (Acts 1883, p. 85) ; §§4443r-4443bl Burns 1901 (Acts 1899, p. 216); Town of Gosport v. Pritchard (1900), 156 Ind. 400, and cases cited.
It is settled in this State that if a town contracts for water or light, or other things which pertain to its ordinary and necessary expenses, and agrees to pay for the same annually or monthly as furnished, such contract does not create an indebtedness for the aggregate sum of all such payments, within the meaning of said article 13 of the Constitution, because the debt for each, year or month does not come into existence until it is earned. But if the indebtedness of the town already equals or exceeds the constitutional limit, and the current revenues are not sufficient to pay such indebtedness as it comes into existence, including the other expenses for which the town is liable, an indebtedness is created in violation of said article 13 of the Constitution. City of South Bend v. Reynolds (1900), 155 Ind. 70, 72, 73, 49 L. R. A. 795, and authorities cited; Board, etc., v. Gardner (1900), 155 Ind. 165, 170, and eases cited; Lake County v. Rollins (1889), 130 U. S. 662, 9 Sup. Ct. 651, 32 L. Ed. 1060; Doon Tp. v. Cum
While the expense of water and light for public use in a town or city is an ordinary and necessary expense, the construction of a water-works or electric light plant by such town or city is not in any sense an ordinary and necessary expense, but an extraordinary one. There is a clear and plain distinction between a contract for water and light for public use and one for the construction of a water and light plant to furnish the same. The first is an ordinary and necessary expense, while the latter involves municipal ownership of the water and light plant, the means of furnishing said water and light, and is an extraordinary expense. City of South Bend v. Reynolds, supra, page 73; Brown v. City of Corry, supra; Scott v. City of Davenport (1872), 34 Iowa 208; Grant v. City of Davenport (1873), 36 Iowa 396, 401-403.
It has been correctly held that municipal corporations can not evade restrictions upon their power to become indebted by issuing their bonds, payable only out of a fund raised by a special tax "authorized, levied, and collected for that purpose (provided the same are not for special benefits, as in the cases of Board, etc., v. Harrell (1897), 147 Ind. 500, and cases cited, and Quill v. City of Indianapolis (1890), 124 Ind. 292, 7 L. R. A. 681), or payable only out of the rentals or income of a water or light plant or other property owned by such municipal corporation, or by buying property subject to liens, although they do not assume or agree, in terms, t'o pay said liens, or by providing
If the plant shall be paid for under the arrangements shown in the special finding, it will cost the town, exclusive of interest, at least the contract price, $21,795, and the additional cost on account of the change of the water and light station, $2,325, making a total of $21,120. The town has not agreed to pay the bonded indebtedness of said company, but, by the ordinances set out in the special finding, it assumed to bind the town to pay $1,350 per annum for twenty-five years as water rentals for fifteen hydrants, being $90 a year for each hydrant, and $570 a yeár for ten years for light rentals, a total of $1,920 per annum during the continuance of the light rental- This amount must be paid each year to the trustee for the’ bondholders, to be applied in payment of the principal and interest of the bonds to be issued by the water company. Not only were the special taxes authorized by law for water and light purposes when said ordinances were passed and the town’s power to levy the same pledged to the payment of said water and light rentals, but the general taxes of said town, and its power to levy the same, were also pledged for that purpose, with a proviso that no undertaking or obligation of the town contained in said ordinances should create any debt of the town within the meaning of the Constitution. If said ordinances created any indebtedness against the town in excess of the constitutional limit, the same was void to .the extent of such excess without regard to said proviso. •
If the Olds Construction Company, or any other corporation in which the town was not a stockholder, had built said water and light plant ready for operation, and given a mortgage or trust deed thereon to secure an issue of bonds for $20,000, and then sold* and conveyed the same to said town, subject to said mortgage or trust deed, in consideration of the bonds of said town for $5,500, and the town’s providing by ordinance, as in this case, for the water and light rentals, and for the levying and collecting of taxes for water and light purposes, to pay the same, and the application thereof to the discharge of said mortgage lien of $20,000 on said water and light plant, and the interest thereon, even if it was expressly agreed that in no event should the town be liable for said bonds, or any part thereof, secured by said mortgage or trust deed, it is clear that said town of Waterloo would, under the authorities cited in this opinion, have become indebted by such an arrangement within the meaning of article 13 of the Constitution of this State. This is put upon the ground that the town, would have to pay said bonds, or submit to have its property taken from it by foreclosure proceedings, and thus lose its property and all the money it had paid thereon. The town must pay the mortgage, or lose all the money paid, and the benefits to be derived from the purchase. “It is expected and understood that it will pay it and the interest on it.” Ironwood Water-Works Co. v. City of Ironwood, supra, and cases cited; Browne v. City of Boston, supra, and cases cited. There is no substantial difference between such a
The capital stock of said Waterloo Water Company was $25,000, and only $5,575 thereof was ever to be subscribed, $5,500 of which, or 200 shares, was to be subscribed by the town, and $75, or three shares, by the officers and attorney of the' Olds Construction Company, the successful bidder for the contract to construct the water and light plant. Under said arrangement the town was to own substantially all the stock to be subscribed, while the statute only by implication, if at all, authorized a town which had become a part stockholder by subscribing to the capital stock to' sell its bonds to pay for the same. There were three stockholders besides the town, each owning one share of stock, but they were necessary in order that there might" be three directors, under the statute which provides that such corporations shall be managed by a board of not less than three directors, who shall be stockholders. If the town had power to take stock in said corporation and become a stockholder therein, it practically owned said Waterloo Water Company, the corporation which obtained the franchise to construct and own the water and light plant,-subject to the bonded debt of $20,000 authorized by said ordinances when said bonds were issued and sold. To obtain this right the town will be compelled to raise $5,500 by a sale of its bonds. It is owned and controlled by the town, and the operation and management of said water and light plant are
It is found that there was no fraud on the part of any of the parties to the action in adopting said ordinances, or in taking the other steps in relation to the establishment of the water and light system in said town. It is not material whether or not there was any fraud on. the part of any one, nor does the necessity for said water and light plant make any difference, if by said arrangement the town became indebted within, the meaning of our Constitution. The language of article 13 of the Constitution is plain and simple, and its meaning is unmistakable. The incurring of indebtedness beyond the amount limited is absolutely and unqualifiedly prohibited, no matter what the necessity, pretext, or circumstances may be, except those provided for in said article, or the form which the indebtedness is made to assume. It binds the courts, curbs the power of the legislature, the officials, and the people themselves, and was intended to protect the taxpayers by confining the indebtedness of a municipal corporation within a prescribed limit.
We will now consider appellants’ second proposition — ' that said town was not authorized to become a part stockholder in said corporation. It is settled law that incorporated towns and cities have only the following powers:
Conceding, without deciding, that the town of Waterloo was authorized by said act of 1895 (§3614 Burns 1901) to take stock in the kind of corporation mentioned therein, the same as cities, did it have the power to become a stockholder in the Waterloo Water Company ? That company, as shown by its articles of association, was incorporated to own and operate a water and light plant and furnish water and light for public and private use in said town.- It is insisted by appellant that there is no law in this State authorizing “the organization of a corporation for the purpose of furnishing both water and light to a town for public and private use” — citing Williams v. Citizens Enterprise Co. (1900), 25 Ind. App. 351. We need not and do not decide this question, for the reason 'that even if a corporation may bé organized'for both of said purposes, §3614, supra, does not purport to authorize towns to issue, negotiate, and sell their bonds to pay for stock in such a corporation. If said section empowers a town to take stock in a corporation and issue, negotiate, and sell its bonds to pay therefor, it' is clear, under the rule of strict construction already stated, that the corporation must be a water-works corporation— one which has been granted a franchise to construct a waterworks plant, and furnish water to said town, one organized for that purpose and no other. The Waterloo Water Com
Other questions are argued in the briefs of counsel, but the conclusion we have reached renders their determination unnecessary.
Judgment reversed, with instructions to restate the conclusions of law in conformity with this opinion, and to render final judgment against appellees, the defendants in the court below, accordingly.