Schnell v. City of Rock Island

• Decision Date: 06 February 1908
• Citation: 83 N.E. 462,232 Ill. 89
• Parties: SCHNELL et al. v. CITY OF ROCK ISLAND et al.
• Court: Illinois Supreme Court

232 Ill. 89

83 N.E. 462

SCHNELL et al.

v.CITY OF ROCK ISLAND et al.

Supreme Court of Illinois.

Dec. 17, 1907.

Rehearing Denied Feb. 6, 1908.

Error to Circuit Court, Rock Island County; W. H. Gest, Judge.

Bill by Matthias Schnell and others against the city of Rock Island and others. From a decree sustaining demurrers to the bill, complainants bring error. Reversed and remanded.

Joseph L. Haas and H. A. Weld, for plaintiffs in error.

Sweeney & Walker and Searle & Marshall (J. F. Witter, City Atty., of counsel), for defendants in error.

CARTWRIGHT, J.

The circuit court of Rock Island county sustained the demurrers of defendants in error to the bill in equity, filed by plaintiffs in error, as taxpayers, to enjoin the city of Rock Island and its officers from paying certain bonds, certificates, and moneys becoming due on contracts entered into by said city, and the bill was dismissed for want of equity, at the costs of plaintiffs in error. The writ of error in this case was sued out to bring the record here for review.

The facts stated in the amended bill, which are admitted by the demurrers, are, in substance, as follows: When the Constitution of 1870 was adopted, the city of Rock Island was indebted to the amount of $170,000, which was more than double the 5 per cent. limit of indebtedness fixed by the Constitution, and that indebtedness has continued ever since, and has at all times exceeded, and now exceeds, 5 per cent. of the assessed value of property within the city. That indebtedness was funded by an issue of bonds dated September 1, 1877, payable in 20 years, and when that issue of bonds fell due, on September 1, 1897, the city issued new bonds to the amount of $170,000 to retire the former issue. While the city was so indebted, and when the limit of indebtedness under the Constitution was $71,777.42, the city council, on November 6, 1871, passed an ordinance providing for another issue of bonds to pay for waterworks, pledging the faith, property, and revenues of the city to pay the same, and providing an annual tax for that purpose. On February 1, 1872, the city issued $25,000 of water bonds under that ordinance, due in 10 years. The bonds fell due in 1882, when they were retired with a new issue of bonds for the same amount, to run for 20 years. When that issue matured, the city, on February 1, 1902, issued $25,000 of new bonds to take up the maturing issue, and those bonds are now outstanding and unpaid, bear interest at 5 per cent. per annum, payable annually, and are due in 1922. On December 27, 1900, the city council passed an ordinance providing for extending and enlarging the existing waterworks, and issuing $40,000 of certificates to pay for such extension and enlargement. The certificates were to be dated January 1, 1901, to be of the denomination of $500 each, numbered from 1 to 80, inclusive, maturing $1,000 January 1, 1903, and $3,000 on January 1st of each year thereafter until 1916. The ordinance fixed water rates and provided for paying into the water fund the proceeds from the operation of the system. The certificates were to be payable out of the water fund and the special taxes which might be annually levied and available for the purpose. The certificates were issued as provided in the ordinance. On December 2, 1903, the city entered into a contract with the People's Power Company for furnishing electric lights to the city, and under that contract, as extended, the power company is to furnish such lights to February 6, 1909, and the city is to pay $65 per light, payable monthly. On November 13, 1905, the city made a contract to purchase a pumping engine for $24,990, to be paid out of the waterworks contingent fund of 1903, the waterworks surplus fund of 1904, and the waterworks construction surplus fund appropriated in 1905 and on hand and to accrue to said funds during said fiscal year. It is inferable from the ordinance and contract that an amount equal to the contract price was on hand in these several funds and available for payment, and the bill does not show the contrary. On January 1, 1906, an ordinance was passed authorizing the mayor and finance committee to borrow not to exceed $2,500 to buy a hook and ladder truck, and under that ordinance the mayor entered into a contract with a company which agreed to furnish a hook and ladder truck, for which the city was to pay $1,960 within 30 days after delivery. On May 8, 1906, the city made a contract with a construction company for an addition to the city pumping station, by which the city was to pay in orders on the waterworks fund of the city for the year 1906, when collected, $6,565 and $883. The indebtedness created by the issue of bonds on February 1, 1872, amounting to $25,000, was in excess of the constitutional limit, and the bonds were void. That indebtedness still exists, and unless the complainants are barred from equitable relief by their own laches they are entitled to have the payment of the bonds enjoined. The only question is whether the complainants have stated a case which entitles them to relief in a court of equity.

It is undoubtedly true that the payment of interest by the city for a long term of years and the refunding of the debt by new issues of bonds have had no effect to render the present bonds valid (Stebbins v. Perry County, 167 Ill. 567, 47 N. E. 1048), and that the city could defend against the collection of the bonds; but the complainants are asking the court to enforce and protect their individual rights and equities, and the general rule is that nothing can call a court of equity into activity but conscience, good faith, and reasonable diligence. Ordinarily, if a city has a right to refuse to pay an obligation on account of its illegality, a taxpayer has a right to compel the city to do so, and it ought to be a very strong case which would bar relief in equity. In this case it cannot be denied that the delay of the complainants in enforcing their rights has been most unreasonable. They have stood by without protest while bonds have been issued, and not only annual payments of interest have been made, but bonds have matured and new bonds have been issued and disposed of. Thirty-four years elapsed after the indebtedness was created, and during that time no action was taken to question its legality or to prevent payment or the new issues of bonds. It is true that the purchasers of the bonds were bound to know the law and to take notice of the restrictions of the Constitution and the authority of the city to issue bonds; but it is also true that the complainants were bound to know their rights and took no measures to enforce them, and we are inclined to hold with the circuit court that as to the issue of $25,000 of bonds a court of equity ought not to interfere. Ordinarily the defense of laches must be set up by plea or answer. Spalding v....