Shields v. City of Loveland

• Decision Date: 02 July 1923
• Docket Number: 10510.
• Citation: 74 Colo. 27,218 P. 913
• Parties: SHIELDS et al. v. CITY OF LOVELAND et al.
• Court: Colorado Supreme Court

218 P. 913

74 Colo. 27

SHIELDS et al. v. CITY OF LOVELAND et al.

No. 10510.

Supreme Court of Colorado, En Banc.

July 2, 1923

Rehearing Denied Oct. 1, 1923.

Error to District Court, Larimer County; Neil F. Graham, Judge.

Action by O. D. Shields and others against the City of Loveland and others. From a decree sustaining a demurrer to the bill and dismissing the cause, plaintiffs bring error.

Affirmed.

On Motion for Rehearing.

R. W. Fleming, of Ft. Collins, and H. S. Sherman Herman W. Seaman, and Ross H. Comly, all of Loveland, for plaintiffs in error.

Pershing Fry, Nye & Tallmadge, of Denver, A. H. Romans, of Loveland and Robert G. Bosworth, of Denver, for defendants in error.

DENISON J.

The plaintiffs in error brought suit against the city of Loveland to enjoin proceedings to establish a municipal electric light plant, and to declare void the ordinance, No. 206, authorizing it. A demurrer to the bill was sustained, and the cause was dismissed. The plaintiffs bring the case here for review.

The bill shows: That, the city having expended $40,000 toward the establishment of an electric light plant, the city council on April 3, 1917, was, by the vote of the people, authorized to issue $83,000 of bonds to use in the construction of such a plant. That April 5, 1921, they were authorized to incur a further debt of $45,000, making $128,000, to construct and complete the system. That by virtue of the ordinance the city council proposes to issue $300,000 additional bonds, known as revenue bonds, payable only out of the revenue derived from the plant. That the ordinance which was passed July 5, 1922, requires the contractor to agree to purchase the bonds at par, and makes an appropriation of $11,250 out of the general fund of the city for the payment of interest to mature November 1, 1922, and levies a tax to reimburse the general fund. That by the ordinance the city irrevocably agrees to pay into the fund composed of the receipts for light service and held for liquidation of the city revenue bonds the sum of $5,000 per annum for not less than 10 years for supplying council did not, by ordinance, in the last council did not, by ordinance, in the last quarter of the year 1921, make any appropriation for interest due November 1, 1922, and no such appropriation has ever been submitted to the people. The ordinance contained the so-called safety clause: 'That whereas, said city and its inhabitants are not adequately or properly supplied with electric lights, an emergency is declared to exist, and this ordinance is declared to be necessary to the immediate preservation of the public peace, health and safety.' That a proper protest and demand for referendum was filed and disregarded.

Plaintiffs in error, in argument, make five points against this proceeding:

(1) Ordinance 206 is subject to referendum.

(2) The council was limited in respect to debt incurrence to $128,000, and (a) the $300,000 of revenue bonds, under the terms of the ordinance, is a debt, and exceeds the legal 3 per cent. limit; (b) the $50,000 to be paid into the light fund is a debt, and with the $128,000 exceeds said limit; (c) irrespective of the determination whether these items are 'debts' within the constitutional meaning, the whole present scheme to be valid would require a submission to the voters.

(3) The proposed act of the city is in defiance of the control of the Public Utilities Commission.

(4) The provision requiring the bidder to finance the scheme is a clog on free bidding and illegal.

(5) The appropriation of $11,250 for interest is not supported by an appropriation in the general appropriation bill.

1. Is the ordinance subject to referendum? The Constitution (article 5, § 1) provides that----

The referendum 'may be ordered, except as to laws necessary for the immediate preservation of the public peace, health or safety * * * against any act, section or part of any act of the General Assembly, either by a petition signed by five per cent. of the legal voters or by the General Assembly.'

Then follow provisions as to procedure, and then:

'The * * * referendum powers reserved to the people of this section are hereby further reserved to the legal voters of every city, * * * as to all local, special and municipal legislation of every character in or for their respective municipalities. The manner of exercising said powers shall be prescribed by general laws, except that cities, towns and municipalities may provide for the manner of exercising the * * * referendum powers as to their municipal legislation.'

The Legislature of 1913 passed a law pursuant to this section, now C. L. c. 2, section 39 of which is as follows:

'No ordinance * * * passed by the legislative body of any city * * * shall take effect before thirty days after its final passage and publication except an ordinance * * * necessary to the immediate preservation of the public peace, health or safety, and not then unless it shall state in a separate section the reasons why it is thus necessary. * * * If within said thirty days a petition signed by qualified electors * * * shall be filed, * * * such ordinance or part thereof so protested against shall thereupon and thereby be suspended, * * * and such ordinance or part thereof shall not take effect unless a majority of the qualified electors voting thereon * * * shall vote in favor thereof. * * *'

The plaintiffs in error claim that, since the recital in the so-called safety clause, above quoted, that the ordinance was necessary for peace, health, and safety, is false, as alleged in the complaint, it does not cut off the right to referendum. To this defendants in error answer that whether those recitals are true is a legislative and not a judicial question.

Article 5 of our Constitution is borrowed from Oregon almost literally, and at the time of its adoption the Oregon courts had already held on this point in favor of the defendants in error. Kadderly v. Portland, 44 Or. 118, 74 P. 710, 75 P. 222, and later in Thielke v. Albee, 79 Or. 48, 153 P. 793, and so we held. See Van Kleeck v. Ramer, 62 Colo. 4, 156 P. 1108; People v. Ramer, 61 Colo. 422, 158 P. 146; In re Senate Resolution, 54 Colo. 262, 130 P. 333. So Ohio, Shryock v. Zanesville, 92 Ohio St. 375, 110 N.E. 937.

The plaintiff in error replies that the cases on this point refer to recitals in an act of the General Assembly, and that a different rule should apply to a city ordinance; but we see no reason to distinguish in this matter between the legislative force of an act of the General Assembly on state affairs and the legislative force of an act of the city council on city affairs.

Plaintiffs in error further claim that the ordinance in question does not 'state in a separate section the reasons why it is thus necessary,' and that therefore the ordinance is as if no safety clause had been in it; but the ordinance does so state such reasons. On the first point, therefore, our conclusion is in favor of defendants in error.

2. Upon the second point we agree that the city was limited in respect of debt incurrence to $128,000, but the council actually did vote to incur but $125,000, which is within the constitutional limit of 3 per cent. on the assessed valuation.

(a) Plaintiffs in error insist, however, that the revenue bonds constitute a debt, and so the lawful limit is exceeded. We do not think that they amount to a debt within the intent of the Constitution or statute. The definitions of the word 'debt' are many, and depend on the context and the general subject with reference to which it is used. 17 C.J. 1371. Its meaning in the sections of the Constitution and statutes now before us must be determined by their purpose, which was to prevent the overburdening of the public and bankruptcy of the municipality. Clearly the revenue bonds are not within that purpose. The public can never be overburdened by that which it is under no obligation to discharge, nor can the city become bankrupt by what it does not have to pay. Nor are these bonds a technical debt. Nothing is my debt unless a judgment for its amount can be recovered against me upon it. See Larimer County v. Ft. Collins, 68 Colo. 364, 189 P. 929; Evans v. Holman, 244 Ill. 596, 91 N.E. 723; Moline v. Pope, 224 Ill. 386, 79 N.E. 587. This point was likewise decided by Mr. Justice Burke, then on the district bench in Northern Colo. P. Co. v. Longmont. That case was brought here on error, but was dismissed.

(b) Is the agreement to pay into the fund $5,000 per annum for street lights a debt? We think it is not. The clause in question reads as follows:

'(b) For street lighting purposes the city of Loveland hereby

...