City of North Charleston v. North Charleston Dist.
| Decision Date | 25 March 1986 |
| Docket Number | No. 22600,22600 |
| Citation | 346 S.E.2d 712,289 S.C. 438 |
| Court | South Carolina Supreme Court |
| Parties | CITY OF NORTH CHARLESTON, a Municipal Corporation, et al., Appellant, v. NORTH CHARLESTON DISTRICT, a Political Subdivision of the State of South Carolina, et al., Respondent. . Heard |
James E. Gonzales, of Gonzales & Gonzales, North Charleston, for appellant.
David G. Jennings, North Charleston, for respondent.
This is an action by the Appellant (City) to recover certain funds allegedly owed to it by the Respondent North Charleston District (NCD). The trial court generally ruled against the City's claims and awarded NCD judgment in the amount of thirty five thousand three hundred ninety seven and 24/100 ($35,397.24) dollars. We affirm.
The City of North Charleston (City) was granted its municipal charter on June 12, 1972, by which it was authorized to provide a full range of municipal services. Prior to incorporation, the municipal services were provided to this area by the North Charleston Consolidated Public Service District (NCCPSD). By Act No. 1768 of 1972, the General Assembly dealt with the 1972 incorporation by reconstituting the NCCPSD as the (1) North Charleston District (NCD) and (2) the North Charleston Sewer District (NCSD), excluding the City from jurisdiction of the NCD. NCD was authorized to provide fire protection, street lighting, sanitation and street cleaning services. NCSD was authorized to provide sewer service.
Act No. 1768 authorized NCD to contract with the City for services, and it provided a mechanism for equitable division with the City of assets held by NCD as a successor to the NCCPSD. The City and NCD entered into a contract on August 28, 1972, in which NCD agreed to provide its services to the City for the period commencing July 1, 1972, and ending June 30, 1973. On June 14, 1973, the parties entered into a second contract whereby the City agreed to provide certain services to NCD for the period commencing July 1, 1973, and ending June 30, 1974. The parties executed their final contract on July 9, 1974, providing that the City would provide certain services to NCD for the period commencing July 1, 1974, and ending June 30, 1975. The parties were unable to agree to a contract after termination of the latter contract, and each entity thereafter separately supplied the service needs of its respective constituencies.
By amended complaint dated November 22, 1982, the City sought to recover certain funds allegedly owed to the City by NCD under the terms of the 1973-74 and 1974-75 contracts and also sought, pursuant to Act No. 1768, a division of the assets held by NCD. The trial judge ruled against the City as to the relief requested and awarded judgment in favor of NCD.
I. Whether Act No. 1768 of 1972 provides for a one-time division of assets or for a continuous division of assets between the District and City in each subsequent annexation by the City.
II. Whether stating the consideration for the 1974-75 services contract in terms of millage makes the contract ultra vires and that portion of the contract invalid.
III. Whether the reference to millage in the capital account portion of the 1974-75 contract should be invalidated and the dollar obligation of the City reduced pro rata.
IV. Whether the $78,599.43 South Carolina Electric And Gas franchise fee paid and delivered to the District on June 29, 1975, belongs to the City under the terms of the 1974-75 contract.
The trial court found that under Act No. 1768, the City was entitled to only a one-time division of assets and the Act did not create a continuing obligation to divide assets as the City grows.
Section 22 of Act No. 1768 provides that "[t]he City is entitled to an equitable share of the assets belonging to the Special District, therefore, at such time as either the City or the Special District elects ... [and] upon such terms and conditions as shall be agreed upon ..."
Section 23 provides for the distribution of assets of the District in the event the City and the District cannot agree.
SECTION 23. In the event the City Council and the Commission are unable to agree upon any allocation of the assets, moneys and properties of the Special District ... the assets, moneys and properties of the Special District shall be apportioned between the City and the Special District, in kind, or if the necessity exists, in value, according to the ratio, existing on the occasion that City Council fixes as the date when the City shall assume functions theretofore vested in the Special District, which their respective assessments bear to the assessment of the entire sewer district....
Section 23 mandates the ratio for division to be that which exists on the date when the City assumed functions theretofore vested in NCD. The City and NCD entered into a contract for services on June 14, 1973, which was to take effect July 1, 1973. Although the parties agreed on June 14, 1973, not to divide the assets, the court properly determined that July 1, 1973, was the date when the City assumed functions theretofore vested in NCD. Based on the valuation of assets on that date, the court determined the City was entitled to receive $28,555.00 from NCD.
The City argues that the scheme of Act No. 1768 is much broader than the trial court determined, as it anticipates future annexations by the City of portions of the District; therefore, there should be a continuing distribution of assets as the City grows through annexation. The City contends the ratio for the division of assets should be 58 percent for the City and 42 percent for NCD. This would result in the City being awarded an additional sum of $122,849.94 from NCD.
We find no basis in Act No. 1768 to support the City's position. The Act indicates a particular distribution formula to be followed in Section 23 and the valuation date is based on the date when the City assumed functions theretofore vested in NCD. It is uncontroverted that the effective date the city assumed functions of NCD was July 1, 1973.
The parties contracted for the year 1974-1975 upon the basis that "... the District shall cause to be levied for the calendar year 1974, a 40 mill ad valorem tax on the assessed value of all real and personal property located within the District ..." The Charleston County Auditor ultimately imposed only 39 mills. The City argues it should have been paid an additional $24,168.00 under the contract.
The trial court held that the contract was ultra vires because NCD did not have the authority to bind or circumscribe the discretion of the independent governmental body (i.e., the General Assembly) or officers (i.e., the Charleston County Auditor) in fixing the ad valorem millage rate to be assessed on behalf of NCD. We agree with the trial court.
It is a fundamental rule of contract construction that the law existing at the time and place of the making of a contract is a part of the contract. Ayres v. Crowley, 205 S.C. 51, 30 S.E.2d 785 (1944); 4 Williston, Contracts, § 615 at 597 (3rd ed. 1961). This rule applies in the area of governmental contracts. See e.g. Colorado Investment Services v. City of Westminster, 636 P.2d 1316 (1981); and 10 McQuillin, Municipal Corporations, 29.118 at 539 (3d ed. 1981).
A person who contracts with a municipality is charged with the knowledge of its limitations and restrictions in making contracts. See Seaboard Airline Railway v. McFadden, 156 S.C. 147, 152 S.E. 809 (1930); Colorado Investment Services v. City of Westminster, supra; 10 McQuillin, Municipal Corporations, § 29.04 at 207 (3d ed. 1981). Neither a municipal corporation nor a special purpose district can, in any manner, bind itself by any contract which is beyond the scope of its powers. G. Curtis...
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