Agawam Nat'l Bank v. Inhabitants of South Hadley

• Decision Date: 03 April 1880
• Citation: 128 Mass. 503
• Parties: Agawam National Bank v. Inhabitants of South Hadley
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

128 Mass. 503

Agawam National Bank v. Inhabitants of South Hadley

Supreme Court of Massachusetts

April 3, 1880

Argued September 23, 1879

Hampden. Contract upon two promissory notes, each signed "The Inhabitants of South Hadley, by Ira B. Wright, town treasurer." By the first, dated March 1, 1878, the defendant promised to pay, three months after date, to the order of the plaintiff's cashier, the sum of $ 2000 "the same being part of the sum that the treasurer was authorized to borrow by vote of March 19, 1877." The second was dated May 4, 1878, and differed from the first only in the amount, and in the date of the vote referred to which in this note was March 18, 1878. The declaration also contained a count for money had and received, being the amount of the above notes. Trial in the Superior Court without a jury, before Dewey, J., who allowed a bill of exceptions in substance as follows:

It was admitted that Ira B. Wright was the treasurer of the defendant town when the notes in suit were executed, and that the signatures thereon were genuine. The following certified copies of votes of the town, which were filed with the plaintiff, were put into the case and admitted to be correct transcripts from the town records, and the only votes of the town purporting to authorize the treasurer to execute the notes or borrow the money sued for in its behalf: "March 19, 1877. Voted, that the treasurer be authorized to borrow on the credit of the town such sums as may be needed, not exceeding ten thousand dollars at any one time, in anticipation of taxes." "March 18, 1878. Voted, that the treasurer be authorized to borrow such sums as may be needed, in anticipation of taxes, not exceeding ten thousand dollars at any one time."

F. S. Bailey, cashier of the plaintiff bank, testified that Wright kept an account as town treasurer at the bank, and kept no individual account; that he discounted the first note, and paid the proceeds to Wright at the date of the note; and that he also discounted the second note at its date, and placed the proceeds to the credit of Wright as town treasurer.

The plaintiff then offered to show that the identical money paid to Wright from the discount of the first note was all used by him in the payment of debts legally due from the town; and that the proceeds of the second note were all paid out by checks drawn by Wright as treasurer, to pay debts due from the town.

Upon this evidence and offer of proof, the defendant contended that no authority had been shown which, under the St. of 1875, c. 209, would authorize the town treasurer to borrow money; and that, for this reason, the plaintiff could not maintain this action on the notes, or on the count for money had and received. The judge so ruled, and found for the defendant. The plaintiff alleged exceptions.

Exceptions overruled.

N. A. Leonard, for the plaintiff.

C. Delano & M. P. Knowlton, for the defendant.

Colt J. Endicott & Lord, JJ., absent.

OPINION

Colt, J.

By the St. of 1875, c. 209, entitled an act to regulate and limit municipal indebtedness, it is provided in § 2 that "no debts shall hereafter be incurred by any city or town, except debts for temporary loans in anticipation of the taxes of the year in which such debts are incurred, and of the year next ensuing, and made payable therefrom by vote of the said city or town; and except as hereinafter provided." Section 3 provides that "debts, other than those authorized by the second section of this act, shall hereafter be incurred by a town, only by a vote of two thirds of the legal voters present and voting at a legal meeting," and by a city only by a two-thirds vote of both branches of the city council. It is provided, however, by § 10, that these restrictions shall not exempt any city or town from its liability to pay debts contracted for purposes for which it may lawfully expend money.

The statute thus deprives cities and towns of the authority to contract debts for borrowed money, which they had previously possessed, whether derived from express grant, or held to exist as an implied power; and, instead of it, gives to these municipalities a limited power which can be lawfully exercised only in the mode specially pointed out. It contains a positive prohibition of all debts contracted for borrowed money in any other mode. The plain object of the law is to protect cities and towns from the creation of municipal debts without sufficient necessity and consideration, and without proper provision for payment, and to prevent improvident and reckless expenditures of public money, as a natural consequence of debts so contracted. All its provisions, reasonably interpreted, with reference to these salutary ends, must be regarded as prohibitory. They establish a plain limit to the exercise of the power to borrow money.

The towns of this Commonwealth are declared by statute to be bodies corporate, but they are public political corporations, with comparatively limited powers and duties. They are charged with the support of schools, the relief of the poor, the laying out and repair of highways, and are empowered to preserve the peace and good order, maintain internal police, and generally to direct and manage their prudential affairs in a manner not repugnant to the laws of the state. They may dispose of their corporate property, and make contracts necessary and convenient for the exercise of their corporate powers. Stetson v. Kempton, 13 Mass. 272. Parsons v. Goshen, 11 Pick. 396. Allen v. Taunton, 19 Pick. 485. The power to appropriate money and levy taxes is derived wholly from the statutes, and is limited to the corporate necessities of the town, and all these special powers which are held for political purposes are at all times subject to legislative control. Gen. Sts. c. 18. When an authority to create a debt for money borrowed is given to such a corporation, and confined to a mode plainly prescribed, that mode is a limitation of the power, of which all persons are bound to take notice.

The votes offered in evidence in this case did not authorize the treasurer to borrow money on the credit of the town. The proposed loans were not made payable by vote of the town from the taxes of that or the succeeding year, nor were the votes passed by two thirds of the legal voters present at the meeting. The notes given by the treasurer in the name of the town were therefore given without lawful authority. Lowell Savings Bank v. Winchester, 8 Allen 109. Benoit v. Conway, 10 Allen...