Muir v. Murray City

• Citation: 186 P. 433,55 Utah 368
• Decision Date: 09 December 1919
• Docket Number: 3366
• Court: Utah Supreme Court
• Parties: MUIR v. MURRAY CITY

186 P. 433

55 Utah 368

MUIR v. MURRAY CITY

No. 3366

Supreme Court of Utah

December 9, 1919

On Application for Rehearing, January 3, 1920.

Appeal from District Court, Third District, Salt Lake County; Wm. H Bramel, Judge.

Action by James A. Muir against Murray City.

Judgment for plaintiff, and defendant appeals.

AFFIRMED.

David W. Moffat, of Murray, for appellant.

H. V Van Pelt, of Salt Lake City, for respondent.

THURMAN J. CORFMAN, C. J., and FRICK, WEBER, and GIDEON, JJ., concur.

OPINION

THURMAN, J.

Plaintiff brought this action to recover the amount due on a certain written agreement entered into by the parties March 20, 1914. The agreement provided for a loan by plaintiff to defendant in the sum of $ 1,200, payable in four annual installments, evidenced by four promissory notes as follows: $ 369 payable in one year, $ 334 in two years, $ 336 in three years, and $ 318 in four years. The said sum $ 1,200 was paid to defendant, and the notes executed in accordance with the agreement. It is alleged in the complaint that the money was used by defendant for corporate purposes. The interest on the loan is included in the amounts above stated. The defendant paid the first two installments when due, and refused to pay the third and fourth, on the alleged ground that the defendant had no power to contract the indebtedness.

Two causes of action are alleged--the first, to recover on one of the promissory notes; the second, on the written agreement for the entire balance due. It will not be necessary to consider the first cause of action. The case was tried to the court without a jury. Judgment was rendered for plaintiff, and defendant appeals.

The record discloses the facts to be: That the defendant city is a populous and progressive community in Salt Lake county, and that its population is rapidly increasing; that in the year 1913 it was engaged in the business of planning for and constructing an electric light plant for the purpose of furnishing light to the city and its inhabitants, and to that end, in the year last mentioned, was seeking to acquire, by negotiation, purchase, or otherwise, certain water rights in Little Cottonwood creek for power purposes; that in the course of its investigation as to the supply of water and its sufficiency for the purpose it ascertained that one Louis E. Despain and wife were the owners of a small electric plant near the mouth of Little Cottonwood canyon, and, for the operation of said plant, were the owners of and using the flow of five second feet of the waters of said creek; that the use of said water at the point where used interfered with the plans of defendant city and prevented it from acquiring a right to use the quantity of water it deemed necessary in view of its prospective growth and probable increase of population; that in order to secure the right of said Despain and wife, defendant procured from them a grant of their right to said five second feet of water upon divers considerations and conditions. One of the conditions was that, whenever it became necessary for the city's purpose to use all of the water required by it, including that purchased from Despain and wife, it would then furnish to them five and one-half kilowatts continuously at the point where they had theretofore developed and used it in the operation of their electric plant.

The record also discloses the fact that the defendant, having secured its right to the use of water for power purposes, constructed a plant and transmission line, and put the same into operation; that it had considerably more power than was necessary for its present needs, and at all times there was a large surplus for which there was no present demand; that for the purpose of supplying Despain with the power it was obligated to furnish under the terms of the contract or grant above referred to, and for the further purpose of beneficially disposing of its surplus power, in 1914 it conceived the idea of constructing a branch transmission line a mile or a mile and a quarter in length to what is known as the town or settlement of Granite, situated a distance of about seven miles beyond the boundary lines of defendant city; that for the purpose of constructing said line, and in order to raise the money therefor, it entered into the contract heretofore referred to, for the nonperformance of which this action was brought; that plaintiff was cognizant of the purpose for which the money was borrowed. The evidence further shows that by the construction and operation of said transmission line to Granite the defendant was not only thereby enabled to discharge its obligation to Despain to furnish him the power stipulated in the grant by which he conveyed his right to defendant, but defendant was also enabled to derive, and does derive therefrom, revenue to such an extent as to render the transaction a profitable investment.

Appellant contends, first, that the city had no power to create an indebtedness and make it payable from year to year except by the issuance of bonds or lawful warrants; second, that the city had no power to construct an electric transmission line beyond its boundary lines for the purpose of supplying another community with electric light.

1. In support of its first proposition appellant quotes from the state Constitution (article 14, section 3) as follows:

"No debt in excess of the taxes for the current year shall be created by any county or subdivision thereof, or by any school district therein, or by any city, town or village, or any subdivision thereof in this state, unless the proposition to create such debt shall have been submitted to a vote of such qualified electors as shall have paid a property tax therein, in the year preceding such election, and a majority of those voting thereon shall have voted in favor of incurring such debt."

This section of the Constitution undoubtedly prohibits a municipality from creating an indebtedness in excess of the revenue for the current year unless the proposition is submitted to a vote of the qualified electors and approved by a majority thereof. But the inhibition only goes to the question of excess amount and not to the time of payment. If the amount of the indebtedness is limited to the revenue of the current year, we know of no constitutional objection to providing for payment after the year expires. In the instant case there is no substantial evidence as to whether or not the debt created was within the revenue of the current year. It is true one witness testified that at the time the debt was created the bond money was exhausted and there was no other available revenue. Just what this language implies as relates to the question under review is not at all clear. It may imply simply that there was no money on hand, no cash in the treasury against which warrants could be drawn--that is, no fund immediately available. For aught that appears in the evidence the potential revenue of the city, such as uncollected taxes, current license fees, fines, and other sources of revenue, may have been amply sufficient to cover the indebtedness in question, and if such was the case the creation of the indebtedness was not prohibited by the Constitution.

Notwithstanding the section of the Constitution above quoted uses the word "taxes," instead of the word "revenue," we are inclined to the view that the word "revenue" conveys the meaning intended. It is hardly possible to conceive that the members of the constitutional convention intended anything other than that the city, in creating an indebtedness without submitting it to the electorate, should keep within the revenue of the current year. Many reasons exist in favor of such an interpretation, and, so far as we can see, there are none against it. We do not understand that counsel for appellant holds a contrary view. Indeed, we feel justified in assuming that as to the interpretation adopted by us counsel is in full accord. In connection with his quotation from the Constitution he also quotes the following language from 28 Cyc. at page 1540:

"'Pay as you go' expresses a municipal rule, prevailing in some states, that annual expenditures must be restricted to annual revenue, of which every person contracting with the municipal corporation must take notice at his peril; but 'income and revenue' includes sums coming into the municipality from other sources than taxation."

It is not necessary to further discuss this phase of the case. The contention of the city that it had no power to create the debt in question, on the ground that it exceeded the limit fixed by the constitutional provision quoted, should not prevail, in the absence of proof that the debt was...