Luther v. Wheeler

• Decision Date: 27 November 1905
• Citation: 52 S.E. 874,73 S.C. 83
• Parties: LUTHER et al. v. WHEELER et al.
• Court: South Carolina Supreme Court

52 S.E. 874

73 S.C. 83

LUTHER et al. v. WHEELER et al.

Supreme Court of South Carolina

November 27, 1905

Suit for injunction by R. L. Luther and others against J. S Wheeler and others. Decree rendered.

Bellinger & Townsend, for petitioners. Hunt, Hunt & Hunter, for respondents.

WOODS J.

The plaintiffs, as resident taxpayers of the town of Prosperity brought this action to enjoin the defendants, as intendant and wardens constituting the town council of that town, from paying a note for $1,000 given to the Bank of Prosperity for money borrowed for the purpose of building a town hall market, and guardhouse. On the application of plaintiffs' attorneys, his honor, Chief Justice Pope granted at chambers, on August 4, 1904, a temporary injunction, and required the defendants to show cause why it should not be made permanent. The defendants appeared on August 18, 1904, in answer to the rule to show cause, and it then appearing that issues of fact were involved, H. C. Holloway, Esq., was appointed referee, "to take the testimony and report the same, together with his conclusions thereon, to the Supreme Court at its regular November term, 1904." The facts as found by the referee are substantially as follows: On March 9, 1902, after due notice given by the town council, about 65 or 70 out of the 90 or 95 registered voters of the town of Prosperity, at least one of the plaintiffs being present, met at the High School building for the purpose of nominating an intendant and wardens to serve for the ensuing year. The testimony shows after the nominations a resolution to the effect that it be "the sense of this meeting that the new council procure a lot, and erect thereon a town hall, market, and guard house," was unanimously adopted. The design and cost of the building were not considered at this meeting, and at no time was the question of borrowing money for its erection ever submitted to the citizens of the town, the newly elected council assuming entire charge of all these matters. The new council made an estimate of the income of the town for that fiscal year, and reached the conclusion that by managing economically they could pay $150 for the lot, expend $1,500 on the building, and still meet the ordinary current expenses of the town. On June 30, 1902, a lot for the site of the building was actually purchased at the price of $150, council giving the note of the town for the purchase money, with interest, due in one year. Relying on their estimate, council passed an ordinance on July 5, 1902, to borrow $1,000 from the Palmetto Bank & Trust Company, Columbia, S. C., "for the purpose of building city hall." A resolution dated July 9, 1902, and properly signed and attested by the town officials, authorized the borrowing of $1,000 from the Palmetto Bank & Trust Company with which "to carry on the affairs of the town," the obligation to be secured by pledge of "the taxes of the town arising from the levy for the present year, or the profits derived by the town from the dispensary, or both if necessary." This resolution is not referred to in the minute book of council, but the referee found that it was the same as the ordinance mentioned as passed on July 5, 1902; and this seems correct, council explaining the apparent difference in purpose for which the money was borrowed by saying that when it was found necessary to borrow they decided to put the sum borrowed into the common treasury and pay it out as needed, whether for work on the building, or for ordinary current expenses. On July 11, 1902, the town council negotiated the note of the town for $1,000, payable January 10, 1903, the resolution of July 9th being attached, at the Palmetto Bank & Trust Company, and received thereon $960. At this time the only debt outstanding against the town so far as the testimony shows was the $150 note given for the purchase money of the lot. It is true the ordinary current expenses for the remainder of the year had to be met, but the resolution authorizing the creation of the debt specified that the money was to be used ""to carry on the affairs of the town," and there is nothing to show that the bank had express notice of the original ordinance specifying that the money was to be used for the purpose of building a town hall.

The cashbook of the town shows that the total municipal income from all sources for the fiscal year beginning April 22, 1902, was $1,832.19. The receipts up to July 11, 1902, were $455.56, and the expenditures $440.82, of which $297.60 was paid out on the building and the balance on current expenses. This left available to council $1,391.37 with which to pay the ordinary current expenses from July 11th to the end of that fiscal year, amounting to $1,001.13, and with which to pay the balance of $1,352.40 on the lot and building debts of $1,650, thus showing council had fallen far short in their estimate. If the $1,650 had not been spent on the town hall, council would have had a balance of $687.84 on hand at the end of the fiscal year; but, instead of limiting the cost of the building and lot to $1,650 as originally contemplated, they decided to enlarge and improve the building, and to meet the additional expense borrowed on September 8, 1902, $600 from the Bank of Prosperity, giving therefor the note of the town, payable in one year, thus making the total indebtedness of the town for the fiscal year 1902 $3,394.35, as against a total income of $1,832.19. At maturity, on January 10, 1903, the $1,000 note to the Palmetto Bank & Trust Company was taken up by the Bank of Prosperity, and a renewal note, under the seal of the town, was given by the council; the ordinance authorizing such action, which was similar to the resolution under which the original debt was incurred, being attached thereto. A like second renewal note was given at the maturity of the first, in 1904, under the authority of a similar ordinance. From this it clearly appears that this last renewal note for $1,000 to the Bank of Prosperity, maturing January 7, 1905, payment of which is herein sought to be enjoined, evidences the same debt that was created on July 11, 1902, with the Palmetto Bank & Trust Company. Thus it will be seen that council had created a debt against the town of $1,750, evidenced by three notes for $150, $1,000, and $600, respectively, which would necessarily have to be paid by a future council, after the expiration of their term of office, and out of taxes and licenses to be levied and collected in another fiscal year, and so the revenues of a future fiscal year would have to be applied to the payment of a debt contracted in a prior year. From the cashbook of the town it appears that the total income of the town, including cash on hand, from April 22, 1903, to April 26, 1904, was $1,806.95, and the expenditures $1,743.96, which included payment of the $150 note for the purchase money of the lot and of the $600 note to the Bank of Prosperity. The total income of the town from January 1, 1903, to January 1, 1904, was $1,504.17, and from January 1, 1904, to November 1, 1904, $1,292, showing that at no time have funds been on hand with which to pay the note for $1,000 held by the Bank of Prosperity. At the time it was determined to erect this building, the council had no place to meet, the market was in bad condition, and the guardhouse totally inadequate; and therefore it was necessary to erect a building of some kind for municipal purposes. When completed, the town hall cost $2,291.01, but the work appears to have been done cheaply, and the building to be quite satisfactory in every way. During the progress of the work on the building, itemized statements of the receipts and expenditures of the town, showing the amount of its indebtedness and to whom due, were published in the newspaper or posted in public places, and any other information of this kind could have been had from the clerk and treasurer. Plaintiffs acquiesced in the incurring of these debts and the building of the town hall to the extent of making no complaint until the bringing of this action. We consider first the general principles of law applicable to the case, and then the effect of the Constitution and the statute law of the state.

Municipal corporations have only such powers as are granted to them by the Constitution or by statute, either expressly or by necessary implication. The following statement of the law taken from 1 Dillon on Municipal Corporations,§ 89, is supported by practically unbroken authority: "It is a general and undisputed proposition of law that a municipal corporation possesses and can exercise the following powers, and no others: First, those granted in express words; second, those necessarily or fairly implied in or incident to the powers expressly granted; third, those essential to the declared objects and purposes of the corporation--not simply convenient, but indispensable. Any fair, reasonable doubt concerning the existence of power is resolved by the courts against the corporation, and the power is denied." State ex rel. Heise v. Town Council, 6 Rich. Law, 404; State ex rel. Atkins v. Maysville, 12 S.C. 76; Blake v. Walker, 23 S.C. 517; White v. Rock Hill, 34 S.C. 242, 13 S.E. 416; Columbia Club v. McMaster, 35 S.C. 1, 14 S.E. 290, 28 Am. St. Rep. 826; Mauldin v. City Council, 42 S.C. 293, 20 S.E. 842, 27 L. R. A. 284, 46 Am. St. Rep. 723. The power to borrow money is not a necessary incident of municipal life, and hence does not exist unless expressly given, or unless some duties are imposed or powers conferred on the corporation which manifestly could not be exercised at all without borrowing money. The two leading cases on the subject are Mayor of Nashville v. Ray, 19 Wall. 468, 22 L.Ed. 164, and Swackhamer v. Hackettstown, 37 N. J. Law,...