Reynolds v. City of Waterville

• Citation: 92 Me. 292,42 A. 553
• Parties: REYNOLDS et al. v. CITY OF WATERVILLE et al.
• Decision Date: 26 December 1898
• Court: Supreme Judicial Court of Maine (US)

42 A. 553

92 Me. 292

REYNOLDS et al.

v. CITY OF WATERVILLE et al.

Supreme Judicial Court of Maine.

Dec. 26, 1898.

(Official.)

Report from supreme judicial court, Kennebec county.

Bill in equity. Heard on bill, answers, and proof. The bill was brought by George W. Reynolds and others, being 12 taxable inhabitants of the city of Waterville, against the city, the city hall commission, created by Sp. Laws 1897, c. 523, and M. C. Poster & Son, who were alleged to have contracted with the city hall commission for the erection of a city building in the city of Waterville. The defendants demurred to the bill, and also answered. Decree for complainants.

From the bill, answer, evidence, and admissions may be gathered the following facts, about which the parties were not in dispute:

(1) That the indebtedness of the city of Waterville exceeds by more than $5,000 "five per centum of the last regular valuation of said city."

(2) That on the 3d day of June, 1896, the city council of Waterville created the "New City Hall Building Commission," which was then and afterwards authorized, and empowered to "advertise for plans for a new city building," "to receive bids for a new city building," to employ an architect to prepare suitable plans and working specifications for the proposed building, "to advertise for bids by contractors for the construction of a new city building according to plans drawn by George G. Adams or others," with full power and authority to close a contract or contracts, to "excavate for a foundation"; that the commission, by authority of the city, enlarged the city hall lot by the purchase of other lands, and caused the whole to be prepared for the erection of a city building, and contracted with an architect.

(3) That on the 15th day of May, 1897, the city hall commission, incorporated by chapter 523 of the Private and Special Laws of 1897, and one of these defendants, contracted with M. C. Foster & Son, other defendants, for the erection by them of a city building, under the provisions of the foregoing act, for the sum of $61,737, and that the Fosters intend to build the city building according to this contract.

(4) That the city building, as contracted to be built, will contain, among other rooms, a large hall, which can be used as a public opera or public amusement hall, but it is admitted that "the use of said city hall will go primarily for the city, and secondarily as a place of amusement." The hall will be furnished with opera chairs, stage scenery, etc.

(5) That chapter 523 of Private and Special Laws of 1897 has been duly accepted by a majority vote of the voters of Waterville.

(6) That by authority of the city council the city hall building lot, additions and improvements, have been conveyed, in trust, to the city hall commission, under the provisions of its charter.

(7) That the city council of Waterville has authorized and directed the city hall commission to issue its bonds for the purposes specified in its charter, not to exceed $75,000, and that the city hall commission intends to issue such bonds, or as much as may be necessary.

(8) That the city intends to become a tenant of the city building when erected, under the provisions of said act.

The complainants charged, and in argument claimed, that the act of incorporating the city hall commission, as a whole, is "an evasion and legal artifice" to enable the city to increase its debts and liabilities far beyond the constitutional debt limit created by the twenty-second amendment of the constitution, and is therefore unconstitutional and void; and, specifically (Waterville being already in debt beyond the limit), that the provisions of the act authorizing the conveyance of the city hall lot and other property to the commission, in trust, directing the indefinite, future, annual assessment of taxes for rental, repairs, insurance, and care of the city building, and creating a sinking fund out of the income of the city building, are each and all of them means to enable the city to indirectly create debts or liabilities beyond its constitutional limit, and are, therefore, unconstitutional.

The complainants further asserted that, in case of default of payment of the bonds in the manner provided by the special statute, the city will ultimately be liable for their payment.

The complainants prayed that the contract between the city hall commission and the Fosters the act incorporating the city hall commission, and the several votes of the city council may all be declared illegal, and in contravention of the constitution of Maine. Also that the city hall commission be ordered to reconvey to the city of Waterville the city hall building lot, and the additions and improvements. Also that the defendants be enjoined from performing the stipulations of the contract to build a city building, and from making any contract for the erection of the city building and lease thereof to the city of Waterville, and from issuing the bonds authorized by the act and by the vote of the city council.

Argued before PETERS, C. J., and EMERY, HASKELL, WISWELL. STROUT, and SAVAGE, JJ.

E. F. Webb and J. W. Symonds, for plaintiffs.

H. M. Heath, C. L. Andrews, Harvey D. Eaton, City Sol., and W. C. Philbrook, for defendants.

PETERS, C. J. The constitution of this state provides that no city or town shall create any debt or liability which singly, or in the aggregate with previous debts or liabilities, shall exceed 5 per centum of the last regular valuation of said city or town.

In interpreting this constitutional provision, we believe we would be willing to adopt the middle doctrine, on which some of the authorities stand, called by counsel for respondents "the rule of reconciliation," which allows a municipal corporation, although its indebtedness has already reached the constitutional limit, to make time contracts, in order to provide for certain municipal wants which involve only the ordinary current expenses of municipal administration, provided there is to be no payment or liability until the services be furnished, and then to be met by annual appropriations and levy of taxes, so that each year's services shall be paid for by each year's taxes; the scheme being variously denominated in the cases as a business, or cash, or pay as you go transaction, and the like.

And we incline to the belief that, on this principle, a town or city may contract for the use of a hall for a term of years, to be used for strictly municipal purposes, provided the principle be fairly applied in any case, and not be abused; not, however, allowing a hall to be hired for the purpose of subletting either the whole or any part of it. Municipal necessities are only to be regarded.

But, under the guise of the principle above stated, a municipality should not be allowed to pass off, as an agreement for renting a hall, an agreement which is not really entered into strictly for such purpose. And we feel that the transaction here in question must be repudiated upon that ground. The transaction has in some respects the semblance of a lease, but it is a misnomer to call it such. It is attempted to make it one thing in form, while in reality it is something else. It is apparent enough that the city is to have, not merely the use of the building to be erected, but the building itself. It is not to get an annual service, to be paid for out of annual revenues, but the city is to acquire a city hall presently, to be paid for by assessments of taxes for the long period of 30 years. It is a purchase.

It would not be a misinterpretation to say that the city of Waterville, instead of leasing the property, undertakes to purchase or pay for it on the installment plan, and that what are called rentals for the hall are merely partial payments on its cost.

In Gross v. Jordan, 83 Me. 380, 22 Atl. 250, the headnote is as follows: "Writing an agreement in the form of a lease does not alter the character of an instrument which, by its more essential terms, discloses itself to be a conditional sale of personal property." The facts of that case showed that by a paper called a "lease," and sprinkled with phrases appropriate to a lease, one person received a wagon of another, agreeing to pay $15 a month for its use; and when the sums so paid amounted to $165 and interest thereon, such party was to receive title to the wagon. The court said: "This paper, which calls itself a lease, is a conditional sale of property, the title passing when the full price shall have been paid. Its own terms are the true test of the nature of a contract, whatever its framers may denominate it." That case was followed by other cases in this state where agreements to convey pianos and sewing machines were attempted to be passed off and construed as leases, but the attempts did not prevail.

We need not dwell on this point, however, because our opinion is that the true nature of the transaction is rather the hiring of money by the city upon the security of city property, through the intervention of a trustee, the title to the property being and remaining in the city from the beginning to the end, subject only to the lien upon it in favor of bondholders for money to be lent. This kind of agreement is so clearly and satisfactorily-explained by Pomeroy in his Equity Jurisprudence, in section 995, that we here quote the entire section, as follows: "Deeds of Trust to Secure Debts. A special form of trust for the benefit of creditors, peculiar to the law of this country, has become quite common in several of the states, and requires a brief description. A 'deed of trust to secure a debt' is a conveyance made to a trustee as security for a debt owing to the beneficiary, a creditor of the grantor, and conditioned to be void on payment of the debt by a certain time, but, if not paid, the trustee to sell the land, and apply the proceeds in extinguishing the debt, paying over any surplus to the grantor. The object of such deeds is, by...