Gould v. City of Paris

• Decision Date: 21 June 1887
• Citation: 4 S.W. 650
• Parties: GOULD v. CITY OF PARIS.
• Court: Texas Supreme Court

4 S.W. 650

GOULD v. CITY OF PARIS.

Supreme Court of Texas.

June 21, 1887.

Appeal from district court, Lamar county.

Hale & Scott, for appellant. Maxey, Lightfoot & Denton, for appellee.

WILLIE, C. J.

The city of Paris purchased of the Silsbee Manufacturing Company a steam fire-engine, hose-cart, and hose for $6,625; paying $1,000 of the amount in a fire-extinguisher, $1,125 in cash furnished by the citizens of Paris, and for the remainder executing 18 bonds, each for $250, dated February 10, 1877, due 10 years after date, with 8 per cent. interest payable annually. To these were attached coupons covering the interest accruing upon the bonds. This suit was brought to recover the amount of some of the matured coupons. There was an alternative prayer for the value of the property sold to the city in case the plaintiff was held not entitled to recover upon the coupons. The suit was by Gould, who claimed to have purchased the bonds from the party to whom they were issued. The bonds recited the purpose for which they were issued, and also that they were authorized by ordinance No. 45 of the city council of Paris. This ordinance authorized the execution and delivery of the bonds and coupons in discharge of the balance due from the city upon the purchase; and further provided for an annual tax of one-tenth of 1 per cent. on the assessed value of the city's taxable property for the purpose of paying the principal and interest of said bonds. It was also a special provision of the ordinance that no part of the current expense fund, nor any part of the interest and sinking fund provided for the payment of the principal and interest on the old debt, should be used or held responsible for the bonds and coupons issued under the ordinance; and an acceptance of the bonds by the company's agent was to be construed as a consent to this provision. The city, in defense, claimed that there was no power under the constitution and laws to issue the bonds, and that limitation barred the claim for the value of the property purchased. The city also relied upon the provision of the ordinance that no part of the current expense fund should be used to pay the bonds, and that of this the appellant had notice, and prayed that the bonds be brought into court and canceled. Other defenses were set up, and the plaintiff filed exceptions to the various pleas of the defendant, all of which were overruled. These it will not be necessary to recite.

It was proved that the city had for three years collected the one-tenth of 1 per cent. authorized by the ordinance, and had applied it to the payment of the coupons and 2 per cent. sinking fund on the bonds, till enjoined by the district court, and that about $300 of the amount thus collected was still in the treasury. It was shown, too, that the indebtedness of the city at the date of the bonds and ordinance did not amount to 6 per cent. of the taxable property of the city. The cause was submitted to the district judge, who held that the city had no power to create the debt or issue the bonds, and that the plaintiff could not recover either upon the bonds, or the value of the engine; but as the city having assessed and collected taxes to pay the bonds, and $300 still remaining in the treasury, which had been voluntarily paid by the taxpayers, the city should be held a trustee for plaintiff for that sum. Judgment was rendered for plaintiff for the $300, and canceling the bonds and coupons still in the hands of the plaintiff, and the latter has appealed to this court.

The purchase of the engine, the passage of the ordinance, and the execution of the bonds were contemporaneous acts, all occurring on the tenth of April, 1877. They were parts of the same transaction, and must be construed together in arriving at the rights and obligations of the parties to the contract. The city purchased the engine, paying part of the purchase money in cash or its equivalent, and executing its coupon bonds for the balance. According to the terms of the ordinance these bonds were to discharge the balance, and they were to be paid by the annual levy of an ad valorem tax of one-tenth of 1 per cent. on the taxable property of the city. No part of the current expense fund was to be used in their payment. The Silsbee Manufacturing Company accepted the bonds in discharge of the balance due it, and hence became bound to look to the levy of this particular tax for the payment of the bonds, and the indebtedness represented by them, and agreed that no part of the current expense fund should be used in payment of them. These were the features of the contract important to a decision of this case. The recitation in the bonds that they were issued in pursuance of the ordinance, which was described by number, date, and caption, and open to the inspection of the world, put every one dealing in these bonds upon full notice of the ordinance by virtue of which they were issued. Hence the plaintiff, as well as the Silsbee Manufacturing Company, must be treated as agreeing to take the bonds in discharge of the indebtedness, and not to look to the current expense fund for their payment. It is a principle of law, sustained by the highest authority, that when a municipal corporation contracts a debt to be paid by taxation, if it has not the power to levy the tax, the debt cannot be enforced against it. "The right to contract must be limited by the right to tax; and if, in the given case, no tax can lawfully be levied to pay the debt, the contract itself is void for want of authority to make it. * * * The validity of a contract which can only be enforced by a resort to taxation depends on the power to levy the tax for that purpose." Loan Ass'n v. Topeka, 20 Wall. 660. As the present debt was to be paid by a resort to taxation, and the levy was not to be of taxes devoted to the payment of current expenses, the vital question is, did the city of Paris have the power to levy any other character of tax for the purpose of paying these bonds and coupons, or the debt which they represented?

Article 420 of our Revised Statutes, which is but a re-enactment of section 76 of the act of March 15, 1875, allows cities to appropriate so much of their revenues, no matter from what source derived, as may be necessary for the purpose of retiring and discharging...