Wakem v. Inhabitants of Town of van Buren

• Court: Supreme Judicial Court of Maine (US)
• Writing for the Court: WORSTER, Justice
• Citation: 15 A.2d 873
• Parties: WAKEM v. INHABITANTS OF TOWN OF VAN BUREN.
• Decision Date: 24 October 1940

15 A.2d 873

WAKEM
v.
INHABITANTS OF TOWN OF VAN BUREN.

Supreme Judicial Court of Maine.

Oct. 24, 1940.

15 A.2d 873

[Copyrighted material omitted.]

15 A.2d 874

Report from Superior Court, Aroostook County.

Action of assumpsit by J. Herbert Wakem, receiver of The Caribou National Bank, against the Inhabitants of the Town of Van Buren to recover on a note. On report on an agreed statement of facts.

Case remanded with mandate to enter judgment for plaintiff.

Argued before BARNES, C. J., and STURGIS, THAXTER, HUDSON, MANSER, and WORSTER, JJ.

David Solman, of Caribou, for plaintiff.

Harry C. McManus, of Van Buren, and Nathaniel Tompkins, of Houlton, for defendants.

WORSTER, Justice.

On report, on an agreed statement of facts. This is an action of assumpsit brought by the receiver of The Caribou National Bank against the Inhabitants of the town of Van Buren, on its promissory note given to said bank. The defendant contends that this action cannot be maintained because the loan for which the note was given was, and is in excess of the constitutional debt limit of that town; and that, even if it once had validity as a temporary loan in anticipation of taxes, yet at the time the action was brought, it could not have been, and cannot now be considered as falling within any exception to the constitutional debt-limit provision.

It appears that on April 30, 1926, said town, pursuant to authority granted by a vote of its inhabitants at a town meeting held on March 31, 1926, borrowed of The Caribou National Bank the sum of $10,000, as a temporary loan, in anticipation of taxes, and gave therefor the note in suit. According to that vote, the loan was "to be paid for out of money raised by taxes during the current year", meaning the municipal year beginning in March, 1926; and a statement to that effect appears in the certificate written underneath the note, and signed by the municipal officers.

The note and certificate are as follows: "$10,000.00 Van Buren, Maine.

"April 30, 1926.

"Nine months after date the Inhabitants of the Town of Van Buren promise to pay to the order of Caribou National Bank at any Bank, Ten Thousand Dollars. Value received.

"John B. Pelletier

"Joseph J. Cyr

"F. D. Goud

"Selectmen of Town of Van Buren

"Guy S. Cyr

"Treasurer of Town of Van Buren"

"The above is a te(r)mporary loan issued under authority granted at the annual Town Meeting of the Inhabitants of the Town of Van Buren, held on March 31st, 1926, and is to be paid out of money received from taxes assessed during the Municipal year beginning March, 1926, and we certify that the same is a legal obligation of the Inhabitants of said town of Van Buren.

"John B. Pelletier

"Joseph J. Cyr

"F. D. Goud

"Selectmen of Town of Van Buren

"Guy S. Cyr

"Treasurer of Town of Van Buren"

It is provided, among other things, in Article XXXIV of the Amendments to the Constitution of Maine, that:

"No city or town having less than forty thousand inhabitants, according to the last census taken by the United States, shall hereafter create any debt or liability, which single or in the aggregate, with previous debts or liabilities shall exceed five per centum of the last regular valuation of said city or town: provided, however, * * * that the adoption of this article shall not be construed as applying * * * to temporary loans to be paid out of the money raised by taxes during the year in which they were made."

The evident purpose of such a debt-limit provision is to prevent the abuse of municipal credit, which might result in ruinous taxation, and to protect the tax payers and their property. 1 Dillon on Municipal Corporations, 5th Ed, section 191, page 342; 6 McQuillin on Municipal Corporations, 2d Ed, page 9.

And it is an absolute bar to an action against a town on any of its indebtedness which falls within the constitutional

15 A.2d 875

prohibition, even although the debt may have been incurred for a most worthy cause and under urgent and pressing necessity. Blood v. Beal, 100 Me. 30, 60 A. 427.

At the time the loan was made for which the note in this action was given, the town of Van Buren was indebted in an amount in excess of its constitutional debt limit, and all persons then dealing with the town were charged with notice of that fact. Merrill v. Inhabitants of Harpswell, 120 Me. 25, 112 A. 834; German National Bank v. Covington, 164 Ky. 292, 175 S.W. 330, 332, Ann.Cas.1917B, 189; McQuillin on Municipal Corporations, 2d Ed, volume 6, page 7, note; Id, volume 3, section 1268.

So no recovery can be had here unless this loan falls within the "temporary loan" proviso in the constitution. By the express terms of Article XXXIV, the debt-limit provision has no application to temporary loans to be paid out of the money raised by taxes during the year in which they were made.

When this loan was made in 1926, it was only a temporary one, to be paid out of taxes raised during the municipal year beginning in March, 1926. But the defendant contends that since it was not paid in that year out of the money raised by taxes during the year in which the money was borrowed, it lost its character as. a temporary loan, leaving it only an ordinary town debt in excess of the debt limit of the town, and therefore now unenforcible.

The validity of a municipal debt upon which an action is brought, so far as the limitation of indebtedness is concerned, must be determined as of the time when the debt was incurred. Addyston Pipe & Steel Company v. City of Corry, 197 Pa. 41, 46 A. 1035, 80 Am.St.Rep. 812; Scranton Electric Company v. Borough of Old Forge, 309 Pa. 73, 163 A. 154.

And, unless otherwise provided in the constitution, a debt of a municipality, valid when incurred, will not be rendered invalid by the mere failure of the municipal officers to pay it out of the proper tax money when collected. See note, 92 A.L.R. page 1312; Athens National Bank v. Ridgebury Township, 303 Pa. 479, 154 A. 791, cited with approval in Scranton Electric Company v. Borough of Old Forge, supra.

In Athens National Bank v. Ridgebury Township, supra [303 Pa. 479, 154 A. 792], the court said:

"The loans were none the less valid because the supervisors used the current revenue for other purposes than their repayment."

And in a somewhat analogous case, the court, in City of Cedar Rapids v. Bechtel, 110 Iowa 196, 81 N.W. 468, 469, said:

"It is true, there was a misappropriation of a part of the current revenue of the years 1894 to 1898, inclusive; but such wrongful act on the part of the officers of the city cannot, under the agreed facts in this case, affect the validity of these warrants."

Therefore, since the debt in the instant case was valid when made, the plaintiff's action thereon will lie, unless recovery is barred by some constitutional provision.

The defendant contends that it is so barred, and, in support of this contention, relies on Blood v....