City of Helena v. Mills

• Decision Date: 02 May 1899
• Docket Number: 510.
• Citation: 94 F. 916
• Parties: CITY OF HELENA v. MILLS.
• Court: U.S. Court of Appeals — Ninth Circuit

94 F. 916

CITY OF HELENA v. MILLS.

No. 510.

United States Court of Appeals, Ninth Circuit.

May 2, 1899

It is sought by the writ of error in this case to review a judgment rendered by the circuit court upon the pleadings in an action brought by the defendant in error to recover for water furnished to the city of Helena under a contract made in pursuance of an ordinance of the city approved by the mayor on August 17, 1897.

The ordinance provided, among other things, that James H. Mills as the receiver of the Helena Consolidated Water Company should furnish 'a full ample, sufficient supply of good pure, and wholesome and clear water through said plant and system and the hydrants thereto connected, to the city of Helena for fire, sewerage, and other municipal purposes, for a period of five years from the first day of August, A.D 1897. ' The ordinance further provided that if, within 30 days after its passage, the receiver should file with the city clerk his acceptance of its terms, it should go into effect and operate as a contract between the parties. The receiver accepted the ordinance, and has since supplied the city with water. In May, 1898, the city refused to pay therefor. The complaint alleged these facts, and further stated that the water plant operated by the receiver is the only one in the city of Helena, and was the only one at the time of the passage of the ordinance; that no other person or corporation was able at the time when said ordinance was passed, or for a long time prior thereto, or at any time since, to furnish water to the city of Helena for the purposes specified in the ordinance; that the city has since the passage of the ordinance levied and collected taxes sufficient to meet the amount provided for in the ordinance. The answer admitted all of said facts, but alleged that at the time when the contract was entered into, and at all times since, the city of Helena could have entered into a contract with responsible parties to supply it with water within six months from the making of such contract, and that within such period the city could have been supplied with water from sources other than those controlled by the defendant in error, and that the contract was entered into without advertising for bids, and that, had the city asked for bids, and offered to enter into a contract with the successful bidder to supply it with water within six months thereafter, responsible parties other than the defendant in error would have bid; that prior to the ordinance the receiver and the water company had for more than two years supplied the city with water without any express contract. The answer further alleged that the city is, and ever since the passage of said ordinance has been, indebted beyond the constitutional limit; that during none of such time has the assessed value of property in the city exceeded $12,656,783, nor the aggregate indebtedness been less than $559,704. A judgment was entered upon the pleadings in favor of the plaintiff in the action.

T. J. Walsh and Edward Horsky, for plaintiff in error.

Clayberg, Corbett & Gunn, for defendant in error.

Before GILBERT and ROSS, Circuit Judges, and HAWLEY, District Judge.

GILBERT Circuit Judge, after stating the facts as above, :

It is contended that the contract between the city of Helena and the receiver of the water company is void-- First, because it was entered into without asking for bids, as required by section 4807 of the Political Code of Montana; and, second, because the city was indebted beyond the constitutional limit when the contract was made,-- and that, even if the contract is not void, the judgment could not lawfully be rendered against the city, because it was indebted beyond the constitutional limit at the time when the indebtedness became due. The constitution of Montana, which was in force when the contract was made, provides as follows (article 13, Sec. 6):

'No city, town, township or school district shall be allowed to become indebted in any manner or for any purpose to an amount, including existing indebtedness, in the aggregate exceeding three per centum of the value of the taxable property therein, to be ascertained by the last assessment for the state and county taxes previous to the incurring of such indebtedness, and all bonds or obligations in excess of such amount given by or on behalf of such city, town or township or school district shall be void.'

From the pleadings, it appears that at the time of making the contract, and ever since, the actual indebtedness exceeded $559,000, whereas the permitted indebtedness was no more than $379,703.49. Did the amount due, and for which judgment was recovered, constitute an indebtedness against the city, within the meaning of that term as it is used in the constitution? The question has heretofore been twice presented to the supreme court of Montana. The case of Davenport v. Kleinschmidt, 6 Mont. 502, 13 P. 249, involved the validity of a contract for a water supply made by the city of Helena. The charter of the city at that time prescribed 'that said city shall not be authorized to incur any indebtedness on behalf of said city for any purpose whatever to exceed the sum of $20,000. ' At the time of making the contract the bonded indebtedness of the city was $19,500, and its floating debt, consisting of outstanding warrants, was $15,000. The court held that no further indebtedness could be incurred until some of the outstanding debt had been discharged. In reaching that conclusion the court considered the nature of the obligation incurred by the city for its annual supply of water, and held that it was an indebtedness, within the meaning of the provision of the charter. It distinguished that case from cases in which a special provision had been made for levying a special tax to meet water rental, as in the case of Water Co. v. Woodward, 49 Iowa, 61, and said:

'In all of the water cases arising in the state of Iowa, we are met with the general statute which authorizes all cities to contract for the erection of waterworks, and to pay for the water used by a special fund raised by a special annual tax not to exceed five mills on the dollar. Such contracts with water companies were held not to create a debt against the cities, because the water companies could never have any general claim against cities, but were held to look to the special fund alone.' After the decision was rendered in that case an act was passed by the legislature of Montana providing for the levy of a special tax of 1 1/2 per cent. upon the assessable property to create a special fund for the payment of bills for fire and water. While that statute was in force, and while Montana was still a territory, the city of Great Falls entered into a contract for the supply of water; and in the case of State v. City of Great Falls, 19 Mont. 518, 49 P. 15, the question arose whether the liability so incurred was an indebtedness, within the meaning of the act of congress limiting the indebtedness of municipal corporations in the territories. The act of congress provided as follows:

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