Cochran v. The Mayor and Council of Middletown
| Citation | 125 A. 459,14 Del.Ch. 295 |
| Parties | EDITH COCHRAN, WILLIAM PRICE, MAY CLAYTON, JULIAN H. FOARD and MAY B. JANVIER, v. THE MAYOR AND COUNCIL OF MIDDLETOWN, a Municipal Corporation existing under the laws of the State of Delaware, and FAIRBANKS, MORSE & CO., a corporation of the State of Illinois |
| Decision Date | 09 July 1924 |
| Court | Court of Chancery of Delaware |
BILL FOR INJUNCTION. The complainants who are taxpayers of the town of Middletown seek by their bill to restrain the carrying out of a certain agreement already entered into between the Mayor and Council of Middletown, a municipal corporation, and Fairbanks, Morse & Co., a corporation of Illinois. The facts necessary to be mentioned are as follows The responsible authorities in the municipality reached the conclusion that a new light and pumping plant was desirable for the town, the old one being of antiquated design and in their judgment unduly expensive to operate. Having reached this conclusion, the agreement in question was entered into with Fairbanks, Morse & Co. to install on the present site new lighting and pumping equipment of improved design in accordance with detailed plans and specifications. It is unnecessary to describe the agreement in full. It provides for a further contract in the form of a lease to be executed between the parties and effective upon the completion of the plant. The lease is to run for the period of one year commencing May 1, 1924, and the town is to be obligated to pay a monthly rental of $ 946.40 ($ 11,356.80 for the year). The town is to be given the option to lease the plant for a second year at the same rental, and upon the expiration of the second year the town is to be given the option to lease the plant for a third year at a like rental. The lease is also to provide that if at the end of the first year the town desires to purchase the equipment it may do so upon the payment to Fairbanks, Morse & Co. of $ 21,598.25 in cash. If it should desire to exercise its option to renew the lease for the second year, then it is to have the right to purchase the equipment at the end of the second year for $ 11,140.01. Should it desire to exercise its option to renew the lease for the third year, then it is to have the right to purchase the equipment at the end of the third year upon the payment of one dollar.
The cause was heard on bill, answers and oral testimony taken before the Chancellor.
Bill dismissed with costs on the complainants.
James I. Boyce, for the complainants.
Martin B. Burris and William S. Hilles, for The Mayor and Council of Middletown.
Caleb S. Layton, of the firm of Marvel, Marvel, Layton and Hughes for Fairbanks, Morse & Co.
The sole question to be decided is whether the agreement entered into between the Mayor and Council of Middletown and Fairbanks, Morse & Co. is null and void because of the charter provision found in Section 20 Chapter 128, Volume 33, Laws of Delaware, being "An act to reincorporate the town of Middletown." The clause in that section which the complainants rely on as invalidating the agreement is as follows:
" The Mayor and Council of Middletown' may borrow money for municipal purposes of any character whatsoever, upon the credit of said town, and issue bonds for the payment of the same; but in no case shall the total indebtedness of every kind, exceed ten per centum of the then last assessed value of all the real estate in said town. * * *"
The evidence shows that the last assessed value of all the real estate in Middletown was $ 1,152,000. The limit of indebtedness fixed by law was therefore $ 115,200. At the time the contract in question was entered into the outstanding indebtedness of the town was $ 86,300. The complainants contend that the agreement already entered into constitutes a contract of purchase by which the town agrees to become indebted for the new lighting and pumping plant in a sum not less than nearly $ 33,000 nor more than about $ 34,000 according to the time when the option to buy is exercised. The defendants contend on the other hand that there is no obligation on the part of the town to buy the plant at any time, that the utmost extent to which the town's commitment goes is to rent the equipment for one year at the rental of $ 11,356.80 payable in monthly installments of $ 946.40. If the complainants are right in their contention, then the agreement will carry the indebtedness of the town beyond the limit fixed by the legislative power of the State and further proceedings under the agreement ought to be enjoined. But if the defendants are correct, then the debt limit will not be exceeded and this court ought not to interfere. The sole question, therefore is the narrow one of whether the said agreement creates an indebtedness of thirty odd thousand dollars, or of a little over eleven thousand.
It is not worth while to go through the reported cases in a search for definitions of the terms "debt" and "indebtedness" when used in statutory and constitutional provisions similar in kind to that with which we are here concerned. These definitions when found are too frequently formulated in the light of the peculiar language of the context in which the terms appear to be of service in ascribing to them a universal application. See note in 37 L R. A. (N.S.) 1058; 5 McQuillin, Municipal Corporations, § 2215; 1 Dillon, Municipal Corporations (5th Ed.) § 193. An examination of the reported cases discloses that many and varied controversies have arisen concerning the meaning of the term "indebtedness" when used in constitutions and statutes limiting the power of municipalities to incur obligations. These controversies have to do with such questions as the following: Does the term embrace the situation of a purchase by the municipality of property encumbered by mortgage; does it cover obligations running into the future for light, water, services, etc., to be paid for when supplied; does it include obligations for what may be called current expenses, the payment of which current revenues may be amply sufficient to meet; does it necessarily import the idea that a remedy for collection must exist whereby payment may be enforced? These are illustrations of the sort of questions which have been debated in the cases. Whatever might be the views expressed in the numerous decisions touching the particular aspect of the subject before the respective courts for determination, it appears to be everywhere recognized that before an "indebtedn...
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