Bank of Lowell v. Cox

• Decision Date: 10 July 1929
• Docket Number: Civil 2807
• Citation: 35 Ariz. 403,279 P. 257
• Parties: THE BANK OF LOWELL, a Corporation, Appellant, v. W. M. COX, as Treasurer of Cochise County, Arizona, Appellee
• Court: Arizona Supreme Court

279 P. 257

35 Ariz. 403

THE BANK OF LOWELL, a Corporation, Appellant, v. W. M. COX, as Treasurer of Cochise County, Arizona, Appellee

Civil No. 2807

Supreme Court of Arizona

July 10, 1929

APPEAL from a judgment of the Superior Court of the County of Cochise.Dave W. Ling, Judge.Affirmed.

Mr. A R. Lynch and Mr. W. G. Gilmore, for Appellant.

Mr James T. Gentry, County Attorney, and Messrs. Sutter & Roche for Appellee.

OPINION

LOCKWOOD, C. J.

In September, 1926, a flood destroyed several bridges in Cochise county.The county budget adopted according to law for that fiscal year some time previously had made no provision for funds which could be used in rebuilding the bridges in question, and the board of supervisors therefore made application to the tax commission, under the provisions of paragraph 4842-A, Revised Statutes of Arizona(Civil Code)1913, as added by Laws of 1921, chapter 52, section 3, for an emergency authorization to incur liabilities for that purpose.This application reads as follows:

"State Tax Commission, Phoenix, Arizona --

"Gentlemen: I am directed by the Board of Supervisors to file with you an application for an Emergency appropriation to repair and reconstruct bridges damaged by the September floods as follows:

Naco Wash

$ 5,500 00

Greenbush Draw

5,300 00

Hereford

13,500 00

Benson-Willcox

63,900 00

Bisbee Wash

5,500 00

Palominas

3,500 00

Earth work all bridges

15,000 00

"Total

$ 112,200 00

"Yours very truly,

"W. E. CLARK,

"Clerk Board of Supervisors."

After the proper statutory notice and hearing, the tax commission made the following order:

"Under the provisions of Chapter 52, Session Laws of the Fifth Legislature of the State of Arizona, 1921, an emergency is hereby declared to exist in the funds heretofore provided in the 1926 budget for the maintenance, repairing and operation of the road system of Cochise County in the amount of $112,200.00 and you are hereby authorized to incur liabilities in the amount of $112,200.00 for the purpose of repairing and restoring the following highway bridges:

Naco Wash

$ 5,500 00

Greenbush Wash

5,300 00

Hereford Wash

13,500 00

Benson-Willcox

63,900 00

Bisbee Wash

5,500 00

Palominas Wash

3,500 00

Earth work all bridges

15,000 00

"Total

$ 112,200 00

"This order is based upon information presented and filed with the State Tax Commission at a hearing held at the Supervisors' office, Tombstone, Arizona, Friday, November 12th, 1926."

March 21st, 1927, the supervisors entered into a contract with the Ware Company for the reconstruction of the Hereford Bridge for an agreed price of $16,212.In August, 1927, the supervisors adopted a county budget for the fiscal year beginning July 1st, 1927, and ending June 30th, 1928, and included therein an item in the sum of $100,000, unsegregated, which was meant to cover all the matters set forth in the order of the tax commission above, and a tax levy was made in accordance therewith.December 5th, 1927, the supervisors drew and issued to Ware Company a county warrant in the amount of $3,839.20, being as stated on the warrant, "in payment of claim No. W -- 116 for Hereford Bridge Contract."This warrant was assigned to the bank of Lowell, a corporation, hereinafter called plaintiff, and by it presented to W. M. Cox, the treasurer of Cochise county, hereinafter called defendant, for payment or registration.The defendant refused to register the warrant, assigning the following reason: "The $100,000 emergency road fund is so nearly taken up that there is not sufficient amount left to care for this warrant."Thereupon plaintiff brought this action of mandamus to compel defendant to register the full amount of the warrant as being a lawful charge against Cochise county by virtue of the order of the tax commission above and the proceedings of the supervisors thereunder.

The complaint set up in substance the foregoing facts and defendant demurred thereto, which demurrer was sustained, and, plaintiff declining to plead further, judgment was rendered as follows:

"It is hereby Ordered, Adjudged and Decreed that plaintiff's complaint and petition for writ of mandamus be dismissed and denied; that the said warrant No. 530, payable to the order of Ware & Company for the sum of $3,839.20, mentioned and described in plaintiff's complaint and petition for writ of mandamus, is void and of no effect and is not a legal claim against the said County of Cochise, State of Arizona; and that said warrant is not entitled to be registered by the above named defendant as Treasurer of Cochise County, Arizona."

From this judgment plaintiff has appealed.

In view of the extreme importance to the state of the real question involved, being the meaning and effect of the so-called "Budget Law,"we shall first analyze the law and then consider its application to the case at bar.

Up to statehood the power of the various boards of supervisors to levy county taxes was governed by paragraphs 3831 and 3832, Revised Statutes of Arizona(Civil Code)1901.There was no limit on the expenditure of these funds, except of course that the purpose must be one authorized by some law; nor was there any method provided whereby the taxpayers of the county were given an opportunity of knowing what expenditures were contemplated so that they might protest if they so wished.Further, the supervisors might incur liabilities on behalf of the county not provided for in the current tax levy and utterly unknown in advance to the taxpayers, which would place a heavy burden on the latter, in some cases extending over a period of many years.As a natural and perhaps inevitable result, most of the counties had outstanding at all times a floating indebtedness of a character and amount unascertained and almost unascertainable, except by an expensive and complete audit of the county records, and necessitating at intervals either a bond issue or heavy and sudden increase of taxation to clear up the indebtedness.This situation was not unique to Arizona, and several of the states had made attempts to meet it by providing for some form of a budget.These laws varied in form, but the fundamental purpose was the same -- to put county affairs on a cash basis and then to maintain them so by prohibiting the incurring of any indebtedness in any fiscal year, unless funds had been first provided to meet it.McGowan v. Ford,107 Cal. 177, 40 P. 231;Board ofCommrs. v. Hampson, 24 Colo. 127, 48 P. 1101;State v. Stanfield,34 Okl. 524, 126 P. 239;Pardee v. Salt Lake County,39 Utah 482, Ann. Cas. 1913E 200, 36 L.R.A. (N.S.) 377, 118 P. 122.

Impelled by the existence of the same evils and guided by the same purpose, our legislature in 1913 adopted what become chapter 3 of title 49, Revised Statutes of Arizona(Civil Code)1913.This chapter contained two provisions new to our law: (a) That the supervisors prior to levying the annual taxes must estimate the probable expenditures for the ensuing year and submit these estimates to the taxpayers at a regularly noticed meeting, and (b) that the tax levy (exclusive of school taxes) for any year could not exceed the previous year's levy more than ten per cent.In 1917 taxes for bond purposes were put on the same basis as school taxes.The law, however, was not fully adequate to meet the evil, in that while the tax levy could not exceed the prescribed ten per cent increase, there was no limit on the incurring of liabilities, and floating indebtedness continued to accumulate, the supervisors of the different counties considering themselves not bound to hold the indebtedness incurred within the tax levied.In 1921(Laws 1921, chap. 52) therefore, the legislature amended paragraphs 4840 and 4842,Revised Statutes of Arizona 1913, and added a new paragraph, 4842-A, so that they read as follows, so far as is material to this case:

"4840.It shall be the duty of the board of supervisors of each county . . . not less than thirty (30) days prior to the date on which the regular annual tax levy is made, to prepare a statement covering the items and details of purposes of expenditures made for the fiscal year last past . . . and to connect therewith an estimate of the different amounts which may be required to meet the public expense for the ensuing year, therein fixing amounts proposed for all subjects which are recurring items of expense, with such an amount for contingency or emergency expenses as may occur, but which cannot be anticipated in advance.The said estimate shall contain a statement of the amount of money required for each item of expenditure necessary for county . . . purposes together with the amounts necessary to pay the interest and principal of the county . . . bonds, as provided by law, and the items and amounts of every special levy by law provided to be assessed, levied and collected. . . .Such estimates shall be fully itemized . . . and shall contain a full and complete disclosure and statement of the contemplated expenditures for the ensuing year, showing the amount proposed to be expended from each separate fund, and the total amount of proposed public expense. . . .The total of amounts in such estimates proposed for expenditure shall not exceed by ten (10) per centum the aggregate of actual expenditures for the centum the aggregate of actual expenditures for the previous year exclusive of expenditures for school, bond, special assessment and district levy purposes. . . .

"4842.It shall be the duty of boards of supervisors . . . to meet one week previous to the day on which they levy taxes when and where any taxpayers who may appear shall be heard in favor of or against any proposed expenditure or proposed tax levies.When such hearings shall have been concluded, such...