Oliver Iron Mining Co. v. Independent School District No. 35
| Decision Date | 18 May 1923 |
| Docket Number | 23,392 |
| Citation | 193 N.W. 949,155 Minn. 400 |
| Parties | OLIVER IRON MINING COMPANY AND OTHERS v. INDEPENDENT SCHOOL DISTRICT NO. 35 AND OTHERS |
| Court | Minnesota Supreme Court |
Action in the district court for St. Louis county against Independent School District No. 35 to have certain contracts entered into by the district declared invalid because in violation of G.S. 1913, § 2058, and amendments, and to restrain the payment of any money and the completion of the work thereon. The case was tried before Hughes, J., who made findings and denied plaintiffs any relief with the exception noted in the first paragraph of the opinion. From orders denying their motion for a permanent injunction, their motion for amended findings and their motion for a new trial plaintiffs appealed. Affirmed.
Limitation in section 2917 does not apply to levy of tax by school board to meet interest and bonds authorized by the electors.
1. This provision: "In independent districts no tax in excess of eight mills on the dollar shall be levied for the purpose of school sites and the erection of school houses," found in section 2917, G.S. 1913, is construed as a limitation on the school board, so that the board may not in any one year levy a greater tax for the purposes stated, but is not a limitation upon the power of the electors of such a district to issue bonds for the same and other purposes, under subdivision 4, § 1855, G.S. 1913; and, when such bonds are issued, the school board must levy a tax sufficient to meet interest and bonds as they mature unaffected by said provision in section 2917.
State Constitution points to this construction.
2. That such is the proper construction is indicated by sections 5 and 6, art. 8, of the Constitution and by the bonding statute referred to.
No statutory limit to such bonded debt, and building contracts are valid.
3. No provision in the statutes relating to the issue of bonds by independent school districts, in the class of the defendant district, for the purposes mentioned in said subdivision 4 § 1855, places a limit upon the indebtedness that may be thus created. Hence, the contracts, for the construction of the school buildings involved, entered when the issue of sufficient bonds had been authorized to meet the amounts of the contracts, are not in violation of section 2058, G.S. 1913, even though the eight mill tax levied under section 2917 is not sufficient to care for the interest and maturing bonds.
Contracts beyond limit of bonded debt may be validated by the electors.
4. Contracts made when not sufficient bonds had been authorized to meet the obligations incurred may be validated by the electors voting to issue sufficient additional bonds and appropriating balances from funds not otherwise set aside to cover all the contracts let.
Findings as to erection of buildings sustained.
5. The findings that the school district had not recklessly, arbitrarily or extravagantly used its powers in the erection of school buildings involved is sustained.
Plaintiffs guilty of laches.
6. It is also held that the evidence sustains the finding that plaintiffs had been guilty of such laches in beginning the suit that, as a matter of law, they should now be estopped from questioning contracts under which the district has acquired valuable structures which it now retains and uses for a proper purpose.
Washburn, Bailey & Mitchell, for appellants.
H. V. Mercer, for respondent school district and its officers.
J. C. McGilvery and Warner E. Whipple, for respondent bank.
Gunderson & Leach, Shearer, Byard & Trogner, Edwin D. Buffington, Ambrose Tighe, Archer & Rosemcier, Austin & Austin, Charles T. Wangensteen, W. E. Whipple and A. R. Folsom, for respondent contractors.
The Oliver Mining Company and certain other mine owning corporations, as plaintiffs, instituted this action, in October, 1921, against Independent School District Number 35, its officers, and a number of persons and corporations with whom the school district had entered contracts for the construction of a grade school building at the village of Kinney and the enlargement of the high school building adjoining the village of Buhl in said district, for the purpose of declaring such contracts invalid and restraining the officers of the district from entering further contracts relative to the erection and equipment of school buildings until the financial status of the district permitted its being lawfully done. The several defendants answered raising the issues that the contracts were valid; that there had been no needless expenditures in the erection of the buildings; that plaintiffs had been guilty of laches and were estopped from challenging the validity of the contracts; and, by supplemental pleadings, that the electors, since the suit and before the trial thereof, had ratified and approved of all that had been done in the premises. Findings of fact and conclusions of law were made denying plaintiffs all relief, except as to the contract with the defendant bank under which the bank had been paid $1,624.23 to act as the fiscal agent of the district. This contract was held invalid and the bank directed to return the said sum. All the other contracts were held valid and enforceable. From the order denying a new trial, plaintiffs appeal.
A short summary of the situation may be thus stated: The School District No. 35 is an independent school district, and, in addition to the villages mentioned, includes other mining locations and an extensive sparsely settled territory bordering the iron range between Virginia and Hibbing. The total population of the district is less than 5,000 and the school enrollment about 1,300 in the day schools and nearly 500 in the night schools. In 1918, when the school board began to plan for additional buildings, there was room to accommodate from 100 to 150 more pupils than the enrollment, but some classes had to be so large as to be detrimental to efficient school work, and the rooms or places assigned to pupils were not always suitable. F.W. Kerr & Company, a corporation, was engaged by the board to prepare plans for a grade school building at Kinney and for additions to the Buhl high school building. Such plans were prepared. However, in 1919, before any contracts were let, the voters, at a duly called election, authorized the construction of the building and additions mentioned and directed the board to obtain a state loan for $450,000 to finance the project. The loan was obtained. The voters at elections subsequently held have authorized further bond issues as follows: $300,000 on May 1, 1920; $500,000 on August 9, 1921, and $500,000 on January 30, 1922. In the building fund on January 1, 1919, there was nothing. At the end of the year there was left, including the proceeds of the state loan, a balance of $361,380.65. The annual tax for 1920 brought the building fund $99,796.46, and for 1921, $89,285.48. Besides these funds so provided there was in the general funds of the district, not accumulated for salaries or current school purposes, the following sums: At the end of 1919, a balance of more than $50,000; at the end of 1920 a balance of $132,387.75, and at the end of 1921 a balance of $323,000. These balances the court finds to have been transferred by the school board to the building fund, at times not disclosed, which transfers were ratified by the electors at an election held January 30, 1922.
The contracts attacked as illegal in this action were entered at various times in the years 1920 and 1921, amounting to a total of something over $2,300,000, including $144,000 paid as architect fees. During the time in question the assessed valuation of the district was about $12,000,000. It is not necessary to be more specific as to dates or amounts of the several contracts.
No finding of fact is assailed as not supported by the evidence, except the last two which will be noticed later. There was a motion to strike out several findings and to amend others, but, as we understand it, this was based on the theory that such findings are immaterial or do not constitute a legal defense to plaintiffs' cause of action, rather than on any claim that they are inaccurate or unsustained.
Plaintiffs ground their right to relief mainly on their construction of sections 2058 and 2917, G.S. 1913. The claim is that section 2058 prohibits and nullifies every school building contract of an independent school district, unless the amount on hand in the building fund with the 8-mill tax authorized by section 2917 provides enough to pay the contract price. If this be the right construction, the trial court erred in his conclusions of law, unless plaintiffs are estopped by laches to urge the invalidity of the contracts, or unless the electors had the power to ratify the same, for one of the findings of fact is: "The school board of said independent school district during the years 1920 and 1921 at many times awarded contracts for the erection of school houses far in excess of the moneys on hand in the building fund and in all funds, such excess amounting at times to hundreds of thousands of dollars and an amount which would require a levy of much more than eight mills upon the dollar of the taxable property of the district to pay."
Chapter 13, p. 37, Laws of 1865, was the first authorization for the organization of independent school districts. In section 16 p. 43, thereof is this proviso: "Provided that no tax shall be levied in any one year exceeding eight mills on the dollar for the purpose of building a school house or school houses, or procuring sites therefor." In slightly different words, this limitation has ever since been found in our statutes, and when the revision consolidated sections 1558,...
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