School District No. 8 v. Twin Falls County Mutual Fire Ins. Co.

Decision Date04 May 1917
PartiesSCHOOL DISTRICT No. 8, IN THE COUNTY OF TWIN FALLS, STATE OF IDAHO, Respondents, v. TWIN FALLS COUNTY MUTUAL FIRE INSURANCE COMPANY, a Corporation, Appellant
CourtIdaho Supreme Court

CONSTITUTIONAL LAW-SCHOOL DISTRICTS-INSURANCE CONTRACT-ESTOPPEL.

1. A school district cannot, under sec. 4 of art. 8 and sec. 4 of art. 12 of the constitution, become a member of a county mutual fire insurance company organized under the Laws of 1911, p. 768, as amended Laws of 1913, p. 129.

2. Sec 4 of art. 8 and sec. 4 of art. 12 of the constitution are intended to prevent any county, city, town or other municipal corporation from becoming interested in any private enterprise or from using funds derived by taxation in any manner in aid of any private enterprise, with the exceptions provided for in sec. 4 of art. 12.

3. A school district is a municipal corporation within the meaning of sec. 4 of art. 12 of the constitution.

4. The liability of a member of a county mutual fire insurance company is unlimited, and therefore a contract by which a school district seeks to become a member of such organization is void under sec. 3 of art. 8 of the constitution. Held that a contract of insurance between a school district and a county mutual fire insurance company is void, and will form no basis for recovery as against the insurance company for loss by fire.

5. A county mutual fire insurance company cannot accept a member whose liability may be limited.

6. An estoppel can never be invoked in aid of a contract which is expressly prohibited by a constitutional or statutory provision.

APPEAL from the District Court of the Fourth Judicial District, for Twin Falls County. Hon. E. A. Walters, Judge.

Action upon a contract of insurance. Judgment for plaintiff. Reversed.

Judgment reversed. Costs awarded to appellant.

Guthrie & Bowen, for Appellant.

The board not having the power to make such a contract could not create a liability against the district, and they could be prevented from paying an assessment, particularly if beyond the statutory limitation. (Nuckols v. Lyle, 8 Idaho 589, 70 P. 401; Hampton v. Commrs. of Logan County, 4 Idaho 646, 43 P. 324; McNutt v. Lincoln Co., 12 Idaho 63, 84 P. 1054.)

In creating legal liabilities, the board of a school district as well as the commissioners of the county must act under the law. (Ward v. Holmes, 26 Idaho 602, 144 P. 1104; Peavy v. McCoombs, 26 Idaho 143, 140 P. 965.)

Where by statute or constitution the power of a municipality or quasi municipality to make a contract is limited, any attempted contract beyond such limitation is void, and no recovery on an implied contract ever can be had for benefits received. No estoppel precludes the municipality from denying liability. (Richardson v. Grant County, 27 F. 495; Fountain v. Sacramento, 1 Cal.App. 461, 82 P. 637; note to 27 L. R. A., N. S., 1120, and cases cited; 20 Am. &amp Eng. Enc. of Law, 1182; Thornburg v. School Dist., 175 Mo. 12, 75 S.W. 81; Citizens' Bank v. Spencer, 126 Iowa 101, 101 N.W. 643; Herman v. Oconto, 110 Wis. 660, 86 N.W. 681; Balch v. Beach, 119 Wis. 77, 95 N.W. 132; Gutta-Percha & Rubber Mfg. Co. v. Village of Ogalalla, 40 Neb. 775. 42 Am. St. 696, 59 N.W. 513; State ex rel. Helena Water-Works Co. v. Helena, 24 Mont. 521, 81 Am. St. 453, 63 P. 99, 55 L. R. A. 336; Hart v. Village of Wyndmere, 21 N.D. 383, Ann. Cas. 1913D, 169, 131 N.W. 271.)

The rule that neither party can take advantage of the invalidity of a contract while retaining the benefits applies only to voidable contracts and not those which are void, as applied to municipalities or quasi municipalities. (Independent School Dist. v. Collins, 15 Idaho 535, 128 Am. St. 76; 9 Cyc. 325; Stiles v. McClellan, 6 Colo. 89; Semon Bache & Co. v. Coppes etc. Co., 35 Ind.App. 351, 111 Am. St. 171, 74 N.E. 41; Doe v. Culverwell, 35 Cal. 291; Fanning v. Hibernia Ins. Co., 37 Ohio St. 339, 41 Am. Rep. 517.)

A mutual company cannot insure beyond the limits of its charter. It cannot insure the property of persons not entitled to become members, nor in territory not permitted, nor on property not allowed. Attempts to insure create no liability. (Andrews v. Union Mut. Fire Ins. Co., 37 Me. 256; Kansas Home Ins. Co. v. Wilder, 43 Kan. 731, 23 P. 1061; Eddy v. Merchants' Mfrs. & Citizens' Mut. Fire Ins. Co., 72 Mich. 651, 40 N.W. 775; Delaware Farmers' Mut. Fire Ins. Co. v. Wagner, 56 Minn. 240, 57 N.W. 656; O'Neil v. Pleasant Prairie M. Fire Ins. Co., 71 Wis. 621, 38 N.W. 345; 28 Cent. Digest, Title Insurance, sec. 73.)

C. O. Longley and Taylor Cummins, for Respondent.

The provisions of the constitution, which prohibits cities, etc., from loaning their credit to any corporation and from becoming directly or indirectly the owners of any stock of any corporation, would not be violated by upholding this contract of insurance. (French v. City of Millville, 66 N.J.L. 392, 49 A. 465; St. Paul Trust Co. v. Wampach Mfg. Co., 50 Minn. 93, 52 N.W. 274.)

The defendant should be estopped from saying either that the school district as such cannot become a member of and insured in a company constituted as the defendant company, or that the school district was not, as a matter of fact, a member of and insured by the defendant company at the time the loss in question occurred. (16 Cyc. 722, 725, 749; People's Fire Ins. Assn. v. Goyne, 79 Ark. 315, 9 Ann. Cas. 373, 96 S.W. 365, 16 L. R. A., N. S., 1180, and note.)

RICE, J. Budge, C. J., and Morgan, J., concur.

OPINION

RICE, J.

This action was instituted by the respondent in the district court for Twin Falls county to recover upon an alleged contract of insurance. From a judgment in favor of respondent this appeal was taken. In the complaint it is alleged that the plaintiff below, respondent here, is a school district organized under the laws of this state; that the defendant, appellant here, is a mutual fire insurance company organized under the laws of this state and doing business in Twin Falls county. It is further alleged that the respondent applied to appellant for insurance on its school building, and that the appellant agreed to insure the same; that the building so sought to be insured was burned, and that appellant failed to pay the insurance as agreed. To the complaint demurrer was filed, upon the ground, among others, that the complaint did not state facts sufficient to constitute a cause of action.

Under the constitution of the state, school districts are prohibited from becoming members of a county mutual fire insurance company. Sec. 4 of art. 8 of the constitution is as follows: "No county, city, town, township, board of education, or school district, or other subdivision, shall lend or pledge the credit or faith thereof directly or indirectly, in any manner, to, or in aid of any individual, association or incorporation, for any amount or for any purpose whatever, or become responsible for any debt, contract or liability of any individual, association or corporation in or out of this state." Sec. 4 of art. 12 of the constitution contains the following provision: "No county, town, city or other municipal corporation, by vote of its citizens or otherwise, shall ever become a stockholder in any joint stock company, corporation or association whatever, or raise money for, or make donation or loan its credit to, or in aid of, any such company or association."

In the case of Atkinson v. Board of Commissioners, 18 Idaho 282, 108 P. 1046, 28 L. R. A., N. S., 412, this court, speaking of sections 2 and 4 of art. 8 of the constitution, said:

"Section 2 prohibits the state in any manner ever becoming interested with any individual, association or corporation in any business enterprise, and it likewise prohibits the state in any manner loaning its credit to the aid of such an enterprise or becoming a stockholder therein; while sec. 4 makes substantially the same prohibition against any county, city, town, township, board of education, school district, or other subdivision of the county or state, ever lending its credit, either directly or indirectly, to any business enterprise in aid of any individual, association or corporation. Sec. 4 of art. 12 reiterates substantially the same thing with reference to counties and municipal corporations as is provided against in sec. 4 of art. 8. Sec. 4 of art. 12, however, specifically authorizes cities and towns to contract indebtedness for 'school, water, sanitary and illuminating purposes,' thereby excluding all other purposes not governmental in their character."

The sections of the constitution referred to are self-operative. They are intended to prevent any county, city, town or other municipal corporation from lending credit to or becoming interested in any private enterprise, or from using funds derived by taxation in aid of any private enterprise, with the exceptions provided for in sec. 4 of art. 12. It is true that sec. 4 of art. 12 does not specifically mention school districts, but when the other provisions of the constitution are taken into consideration, as well as the objects sought to be attained, it must be held that school districts are municipal corporations within the meaning of said sec. 4. ( Maxon v. School Dist., 5 Wash. 142, 31 P. 462, 32 P. 110; State v. Grimes, 7 Wash. 191, 34 P. 833; Pioneer Irr. Dist. v. Walker, 20 Idaho 605, at p. 615, 119 P. 304.)

In Fenton v. Board of County Commrs., 20 Idaho 392, 119 P. 41, this court held that school districts are not municipal corporations within the meaning of sec. 6 of art. 7 of the constitution, and in that opinion the court said that it did not...

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