City of Laporte v. The Gamewell Fire Alarm Telegraph Co.

• Decision Date: 22 December 1896
• Docket Number: 17,596
• Citation: 45 N.E. 588,146 Ind. 466
• Parties: City of Laporte v. The Gamewell Fire Alarm Telegraph Company
• Court: Indiana Supreme Court

45 N.E. 588

146 Ind. 466

City of Laporte v. The Gamewell Fire Alarm Telegraph Company

No. 17,596

Supreme Court of Indiana

December 22, 1896

From the LaPorte Circuit Court.

Reversed.

W. B Biddle and J. H. Bradley, for appellant.

Andrew Anderson, for appellee.

OPINION

Monks, J.

This action was brought by appellee, against appellant, to recover the contract price of a fire alarm system furnished by appellee.

The court, at the request of the parties, made a special finding of facts and stated as a conclusion of law thereon, that appellee was entitled to recover the contract price. To this conclusion of law appellant excepted. The assignment of errors calls in question the conclusion of law.

It appears, from the special finding, that on August 5, 1890 appellee entered into a contract with appellant to furnish and put in complete working order appellee's system of fire alarm, for the sum of $ 3,500.00, to be paid May 1, 1891. The contract provided that when said system was completed appellant should accept the same and deliver to appellee a certificate to that effect. The work was completed and accepted by appellant December 18, 1890. At the time of entering into the contract, and until May 1, 1891, appellant was indebted, not including appellee's claim, over $ 5,000.00, more than two per cent. on the assessed value of its taxable property. At the date of said contract $ 2,639.90 was on hand in the city treasury. When the work was completed and accepted there was on hand in the general fund $ 359.00. On May 1, 1891, there were $ 10,328.80 in the city treasury belonging to the general fund collected from the duplicate of 1890. On June 30, 1890, the common council of appellant, by resolution duly passed, ordered that a tax of $ 1.05 on each hundred dollars of valuation of taxable property be levied, 74 cents for general purposes and 31 cents for the purpose of paying $ 5,000.00 of the city debt and the interest on the city debt. That the amount of said levy was $ 31,285.00. No specific levy was ever made for the purpose of meeting any indebtedness to appellee.

On June 22, 1891, the common council passed a resolution, declaring "that $ 3,532.68 be set aside out of the general fund for the purpose of paying the order drawn in favor of the Gamewell Fire Alarm Telegraph Company, which was ordered drawn May 25, 1891, by the common council, and which the mayor refused to sign."

Appellant earnestly insists that by the contract sued upon appellant become indebted to appellee, and that the same was void under the provisions of Art. 13, of the constitution, for the reason that appellant was already indebted in excess of the amount allowed by said article.

Article 13, of the constitution, adopted in 1881, is as follows: "No political or municipal corporation in this State shall ever become indebted, in any manner or for any purpose, to an amount, in the aggregate exceeding two per centum on the value of the taxable property within such corporation, to be ascertained by the last assessment for State and county taxes previous to the incurring of such indebtedness; and all bonds or obligations, in excess of such amount, given by such corporation, shall be void: Provided, That in time of war, foreign invasion, or other great public calamity, on petition of a majority of the property owners, in number and in value, within the limits of such corporation, the public authorities, in their discretion, may incur obligations necessary for the public protection and defense to such an amount as may be requested in such petition."

This clause in our constitution is in legal effect, the same as that of Iowa, and was no doubt taken from the constitution of that state. It is a familiar rule that where a clause is taken from the constitution or statute of another state it will be deemed to have the meaning given it by the courts of that state. Under this provision every indebtedness incurred "in any manner or for any purpose" is within the prohibition. Council Bluffs v. Stewart, 51 Iowa 385, 1 N.W. 628; Scott v. City of Davenport, 34 Iowa 208; Grant v. City of Davenport, 36 Iowa 396, 401; French v. City of Burlington, 42 Iowa 614; Anderson v. Orient Fire Ins. Co., 88 Iowa 579, 55 N.W. 348; Brown v. City of Corry, 175 Pa. 528, 34 A. 854; Lake County v. Rollins, 130 U.S. 662, 9 S.Ct. 651, 32 L.Ed. 1060; Doon Tp. v. Cummins, 142 U.S. 366, 12 S.Ct. 220, 35 L.Ed. 1044; Litchfield v. Ballou, 114 U.S. 190, 5 S.Ct. 820, 29 L.Ed. 132; note to Beard v. Hopkinsville, 23 L. R. A. 402-408; note to same case, 44 Am. St. 229-243.

The controlling question in this case is, do the facts found show an indebtedness of appellant within the inhibition imposed by the foregoing article of the constitution?

A debt in its general sense is a specific sum of money which is due or owing from one person to another, and denotes not only an obligation of the debtor to pay, but the right of the creditor to receive and enforce payment. State v. Hawes, 112 Ind. 323, 14 N.E. 87; City of Valparaiso v. Gardner, 97 Ind. 1; Crowder v. Town of Sullivan, 128 Ind. 486, 28 N.E. 94.

It is the rule in this State that when a municipal corporation contracts for a usual and necessary thing, such as water or light, and agrees to pay for it annually or monthly, as furnished, the contract does not create an indebtedness for the aggregate sum of all the installments, since the debt for each year or month does not come into existence until it is earned. The earning of each year's, or month's compensation is essential to the existence of a debt. Crowder v. Town of Sullivan, supra, and authorities cited; City of Valparaiso v. Gardner, supra, and cases cited; Foland v. Town of Frankton, 142 Ind. 546, 41 N.E. 1031, and authorities cited; Seward v. Town of Liberty, 142 Ind. 551, 554, 42 N.E. 39; 1 Dillon on Munic. Corp. (4th ed.), section 136a; Wade v. Oakmont Borough, 165 Pa. 479, 30 A. 959; Brown v. City of Corry, supra.

If the city can pay this indebtedness when it comes into existence without exceeding the constitutional limit there is no indebtedness, and therefore no violation of the constitution. But if the indebtedness of the city already equals or exceeds the constitutional limit, and the current revenues are not sufficient to pay such indebtedness when it comes into existence, including other expenses for which the city is liable, an indebtedness is thereby created and there is a violation of the constitution. City of Valparaiso v. Gardner, supra; Dillon on Munic. Corp., section 136, 136a; Appeal of the City of Erie, 91 Pa. 398.

It is also the law that items of expense essential to the maintenance of corporate existence, such as light water, labor and the like constitute current expenses payable out of current revenues. Foland v. Town of Frankton, supra, p. 550. When the current revenues are sufficient to fully pay the current expenses necessarily incurred to sustain corporate life, no indebtedness is incurred. But a debt cannot be made beyond the constitutional limit, even for the current expenses mentioned, no matter how urgent. Sackett v. City of New Albany, 88 Ind. 473; City of Valparaiso v. Gardner, supra.

It is clear, therefore, that whenever a city whose indebtedness exceeds the constitutional limit, does not have the money on hand arising from current revenues to meet its debts of whatever character as they come into existence, whether for light, water, labor or any other expense, the city has become indebted and the constitution is violated.

It is not sufficient, however, merely to have on hand enough money to pay each indebtedness as it comes into existence, but the same must be paid as it comes into existence, or there must be enough money on hand to pay all of such indebtedness outstanding, or there will be an indebtedness created and the constitution be thereby violated.

If to avoid the constitutional inhibition it is only necessary to have on hand sufficient money to pay an indebtedness when it comes into existence, without paying or keeping on hand enough money to pay it, there would be no restraint upon the power of a municipality to become indebted.

Obligations payable out of a particular fund, and for which the fund only and not the municipality is liable, are not within the inhibition. Quill v. Indianapolis 124 Ind. 292, 23 N.E. 788; Strieb v. Cox, Treas., 111 Ind. 299, 12 N.E. 481; Board, etc., v. Hill, 115 Ind. 316; City of New Albany v. McCulloch, 127 Ind. 500, 505, 26 N.E. 1074; Hitchcock v. Galveston, 96 U.S. 341, 24 L.Ed. 659; Galveston v. Heard, 54 Tex. 420; Davis v. City of DesMoines, 71 Iowa 500; Baker v. Seattle, 2 Wash. 576, 27 P. 462; Austin v. Seattle, 2 Wash. 667, 27 P. 557.

The same rule applies to agreements to accept certificates of assessments in full satisfaction. Davis v. City of DesMoines, supra. But anything that renders the city liable brings the indebtedness within the restriction. Fowler v. City of Superior, 85 Wis. 411, 54 N.W. 800.

It is held in some states, under constitutional provisions substantially the same as ours, that a municipality which has reached its limit may anticipate the collection of the revenue appropriated to its use by drawing warrants against taxes levied but not collected, thus substantially appropriating and assigning the amount drawn to the holder of the warrant. French v. City of Burlington, supra; Law v. People, 87 Ill. 385; City of Springfield v. Edwards, 84 Ill. 626; City of East St. Louis v. Flannigan, 26 Ill.App. 449; Koppikus v. State Capitol Commissioners, 16 Cal. 248.

But in order to escape the inhibition of the constitution the tax must not only have been levied, but the warrant must be drawn payable out of the particular fund, and be such in legal effect as to discharge the...