Hoffman v. Board of County Commissioners , 18 Mont. 224 ( 1896 )

Hunt, J.

The substance of the plaintiffs’ complaint is that the board of county commissioners of Gallatin county pretended to borrow §30,000 from the Commercial Exchange Bank of Bozeman, and issued warrants therefor in order to create what appeared to be a warrant indebtedness of Gallatin county to said bank. The amount of this apparent debt, when added to the amount of legal outstanding warrants aggregated over §45,000. To create this apparent additional debt of §30,000, the board of county commissioners pretended to borrow the money in several amounts, — two of §10,000 each, one of §7,500, and one of §2,500. It appears by the complaint that these amounts were all treated as loans, for which the bank filed its several claims or accounts as claims against counties are usually presented. The board allowed each and every claim, and ordered warrants to be issued to the bank. Upon the second day after the allowance of these apparent claims of the bank for §30,000, the commissioners made an order for an issue of bonds of the county in the sum of $45,-000, to fund the outstanding warrant indebtedness, and ordered notice of said sale of such bonds to be published. The question of issuing said bonds was never submitted to the electors, and it is alleged that the bonds are not issued to redeem any part of the outstanding bonds of the county.

The facts pleaded stated a cause of action; for, if it be true that the commissioners were not authorized by law to borrow §30,000, by way of loan, without the approval of the electors, no evasion by which the letter and spirit of the law are violated will be sustained by the court, when a proper case is presented. “Counties, cities and towns are municipal corporations created by the authority of the legislature; and they derive all their powers from the source of their creation, except where the constitution of the state otherwise provides. Beyond doubt, they are, in general, made bodies politic and corporate, and are usually invested with certain subordinate legislative powers, to facilitate the due administration of their internal affairs, and to promote the general welfare of the municipality. They have no inherent jurisdiction to make laws or to adopt governmental regulations, nor can they exercise any other powers in that regard than such as are expressly or impliedly derived from their charters, or other statutes of the state. ’ ’ (Commissioners of Laramie Co. v. Commissioners of Albany Co., 92 U. S., 307; Lebcher v. Commissioners of Custer County, 9 Mont., 320.)

The constitution (article XIII § 5) provides that £ £no county shall incur any indebtedness or liability for any single purpose to an amount exceeding ten thousand dollars (§10,000) without the approval of a majority of the electors thereof, voting at an election to be provided by law. ’ ’ This is a general limitation upon the power of county boards, inhibiting their right to incur any debt or liability for one purpose only, in excess of §10,000, without the approval of the majority of the electors voting as may be provided by law. For the exercise of the power within this limited authority the legislation pertinent to the subject may be quoted. The board of commissioners have power £lto apportion and order the levying of taxes as provided by law, and to borrow money upon the credit of the county, a sum sufficient for the erection of county buildings, or to meet the current expenses of the county in case of a deficit in the county revenue.” Subdivision 4, § 756, Division 5, Compiled Statutes 1887. There was, therefore, in the Compiled Statutes, an expressed recognition of two accounts for which a county might borrow money,- — one, to erect county buildings; the other, to meet current expenses in case of a deficit in the county revenue.

The compiled laws of 1887, § 795, also provided that the board of county commissioners should not borrow money for the purposes specified in the statute just hereinbefore quoted, —that is, either to erect county buildings, or to meet current expenses in case of a deficit — without having first submitted the question of such loan to a rote of the electors of the county. When the constitution of the state took effect, in recognition of its restrictions, the legislature, by an act of March 4, 1891, in relation to county bonds, amended section 795, last cited, so as to read as follows: “The board of county commissioners of any county may, when in its judgment it is advisable for the county to incur indebtedness or liability for any single purpose in an amount exceeding §10,000, submit the question to the qualified electors of the county. ’ ’

The appellants have not argued the question whether the last above quoted section, which is now in force, authorizes an indebtedness for any purpose, provided it is single, in an amount exceeding §10,000, or whether such act should be construed as but a means for the execution of a power to borrow money for the only two purposes specified in section 756, viz: the erection of county buildings, or the liquidation of current expenses in case of a deficit. The respondents have referred to this point, contending that the act of 1891 has relation to the limitations in the Compiled Statutes of 1887, and has not abrogated such limitations. But whether or not the respondents are correct in this respect it is not necessary to decide in this case, because, under our view of the pleadings, the issuance of §30,000 worth of bonds for a loan made without the approval of a majority of the electors voting at the election as provided by law was unconstitutional and void. The method employed, of borrowing money for a few hours in sums of §10,000 or less, at a time, is wholly indefensible, and was plainly to get around the constitution of the state, and to avoid the submission of the question of the loan of §30,000 to the electors of the county. The indebtedness, even if real, was incurred for the single purpose of a loan of §30,000 made by the bank, and the splitting of the sum loaned into several separate amounts of §10,-000 or less, each, cannot alter the fact that the county on one day incurred a debt for a single purpose in an amount exceeding §10,000, without submitting the question to the qualified electors of the county.

The answer admits that the commissioners and the bank “made and entered into the agreement pleaded by plaintiffs’ complaint, substantially, ’ ’ but says that prior to the institution of this action the parties thereto abandoned such agreement. This is an admission of the fact that such an agreement was in force when the warrants were drawn; that is, that the warrants issued to the bank for $30,000 were not to be drawn against by the county, or paid out by the bank, except upon condition, alone, ‘ ‘and in the event that the said board of county commissioners would and should thereafter issue the bonds of said county in an amount sufficient, and realize from the sale thereof a sum sufficient, to pay and to take up said warrants. ”

There are denials ‘ ‘that the board at any time created any fictitious indebtedness for any purpose whatever,” and that the bank had any deposit of money by the board under any agreement whatever; but such denials are inconsistent with the express admissions of the answer, are clearly evasive, and do not deny the direct and specific statements of the complaint. (Power v. Gum, 6 Mont. 5; Stewart v. Budd, 7 Mont. 573; State v. Dickerman, 16 Mont., 278; Dole v. Burleigh, 1 Dak. 227, 46 N. W. 692.)

The indebtedness of $30,000 for any single purpose is denied, but it is averred that, for debts due from said county to said bank, warrants were drawn. It is denied only that any warrant was issued to the bank in any greater sum than $10,000, or that the county was ever indebted to said bank for any single purpose, in a sum to exceed $10,000.

Again, the allegation of the complaint is that on March 15, the legal, outstanding warrants of the county, for which the county was liable, did not exceed $17,000, made up of warrants in specific amounts against several county funds. This is denied first by a specific denial that the legal, outstanding warrants did not exceed the sum of $17,000, and an allegation that on that date the outstanding orders and warrants amounted to at least $45,000. But this is made ineffective by a denial that the outstanding warrants at the time the complaint was filed (May 28, 1894) did not exceed $17,000, but, on the contrary, were in excess of $51,000. Let us, then, look at the affirmative answer. By it we learn that on March 14, 1894, the county was indebted to the Commercial Bank in the sum of $10,000, “which was then due and unpaid;” that the said bank presented its claim for said sum, and the board settled and allowed the account as ‘ ‘properly chargeable against the county of Gallatin, for the sum of $10,000,” and thereafter, in payment thereof, a county order for said sum was signed, and delivered to the bank; and that the said order ‘ ‘is one of the warrants which were funded by said board as set forth in plaintiffs’ complaint. ’ ’ Like averments are made in reference to 'three other warrants, all aggregating $30,000. It is then alleged that these four warrants, making $30,000, as drawn upon the bank’s account, are all the warrants issued to the said bank in March, 1894, and, together with numerous other outstanding warrants, aggregated on March 15, 1894, the sum of $45,000. Thus, the answer identifies the warrants as being accounts allowed to the bank aggregating $30,000, as specified in the complaint. The warrants being thus identified, we look in vain for some statement in the defendants’ pleading which specifically contradicts the complaint in its allegations of facts, — that the county commissioners, on the faith of the county, pretended to borrow from the bank the sum of $30,-000, and to issue therefor the warrants, pretended or- otherwise, of the county.'

We do not regard the use of the adjective characterizing the loan asa “ pretended ’ ’ one as important to the decision of this case. It signifies the legal view that the plaintiffs take of the conduct of the board, their contention being that because the loan was invalid, by reason of its being made to base a bond issue upon, and because not submitted to the electors, the whole transaction was, in law, an unreal and worthless one; while defendants, by their evasive answer, substantially insist that although the transaction was had, as alleged, still it was done by such a method and in such a form that it was not in excess of the legal powers of the board, hence was not pretended or worthless at law.

But how did these accounts of $10,000, $2,500 and $7,500 become accounts ‘ ‘ properly chargeable ’ ’ against Gallatin county, all due and unpaid March 14, 1894? What facts made them the bases of properly chargeable accounts, unless they were included in the loan purported to hare been made as charged in the complaint ?

Whether accounts are properly chargeable against a county, under certain conditions, involves legal questions of considerable magnitude. But here the matter is solved by the pleadings. The complaint charges a pretended loan, and that the warrants were illegally issued to enable bonds to be sold to fund said loan. The answer not only affirmatively particularizes the warrants as correctly described by the complaint, but fails to specifically deny that the whole transaction was a loan of $30,000 and that it was the sums making up this $30,000, which, added to the divers other outstanding warrants made up the total outstanding debt of $45,000 or more. The pleadings, therefore, raised no issuable facts. The board of commissioners stood before the court as having assumed to borrow $30,000 in a single loan, and to issue warrants therefor, and as about to deliver bonds to fund this loan of $30,000, without ever having submitted any question to the electors, and obtaining their approval of their action. Thus, whether the borrowing was in good faith, or was fictitious, we need not dwell upon. In either event, it was wholly beyond the power of the board to incur any such liability without complying with the constitution and the law. As was said .in Hefferlin v. Chambers, 16 Mont. 349, 40 Pac. 787 :

£ ‘ If we were to sustain the proposition of appellants in this case, it would be to allow county commissioners to expend more than $10,000, or incur an indebtedness or liability exceeding that sum, if they simply resorted to the evasion of dividing the total amount into several sums, each less than $10,000, and expending each of said several sums, or incurring each of said several liabilities, at different times. Under such'construction they could expend $9,999 in each of several successive years, and the total of said amounts all for one purpose. If they could do this in each of several successive years, why not in each of several successive months or days ? It is clear that such conduct would be a gross violation of the constitutional provision, and that it was just such a violation as was contemplated by these appellants, and restrained by the district court.”

We are cited to Hotchkiss v. Marion, 12 Mont. 218, 29 Pac. 821. There the county commissioners were about to issue bonds to fund outstanding warrants. No question of a loan to create a debt upon which to base a bond issue entered into the case at all. The court decided that under such circumstances the issuance of the bonds changes the form of the indebtedness, and was not the creation of a new debt or liability, within the constitutional prohibition. The illegality of the debt was not involved.

The appellants devote much space in their briefs to the contention that the only remedy plaintiffs had was by appeal, under section 764, Fifth Division of-the Compiled Statutes, from the action of the board in allowing the claims of the bank for the various sums aggregating $30,000. We cannot agree to this. Whatever may be the rule where the party has a claim or account against a county, and attempts to prosecute an action in debt, or even in tort, we hold that where a taxpayer, by proper showing, asks an injunction to restrain county commissioners from consummating a sale of county bonds, based upon an unconstitutional act, relief should be granted. In such a case no exercise of discretion in a matter within the jurisdiction of the board arises. Having no jurisdiction to incur any indebtedness in excess of $10,000, for any single purpose, without the approval of the electors, it followed in this case the board had no authority at all to make any such loaD, or allow claims for any such loan, and their actions were a nullity. (Carroll v. Siebenthaler, 27 Cal. 193.)

High on Injunctions, § 1251, cites the following as the doctrine to be applied : ‘ ‘ While it is quite true that the administrative discretion of the board in the business affairs of -the, county cannot be reviewed by a court, yet when the board undertake to do an act unauthorized by law a court will enjoin them, and this is the proper remedy. Boards have an administrative discretion within the law, but none without or against it. ’ ’

It is urged that plaintiffs were not diligent in instituting this action. The warrants were issued March 15th. Suit was commenced May 28th, and before the bonds were delivered. These dates at once contradict any suggestion of lack of diligence.

There is clearly no misjoinder — which means an excess — of parties. Nor was there a defect of parties. The action being by taxpayers against the commissioners, to restrain the delivery of the bonds, and declare the proceedings of the board null and void, we cannot see how it was necessary that the banks be made parties. If they have rights, they are not prevented from enforcing them by appropriate remedy. (Pome-roy’s Code Rem. § 418; Boone on Code PL, §-51.)

The action was properly brought in the name of plaintiffs as taxpayers. (Davenport v. Kleinschmidt, 6 Mont. 502.)

Defendants are in no position to complain because judgment was entered against Chrisman, treasurer. Chrisman did not appeal in his own behalf. The court was authorized to enter judgment on the pleadings, upon Chrisman’s default.'

Appellants object to the extent to which the judgment went, in enjoining the execution or delivery of the particular bonds described in the complaint, or any bonds of Gallatin county, on account of said §30,000 of warrants issued to the Commercial Bank, complained of in the complaint. This relief extends no further than is necessary to protect plaintiffs, as taxpayers, against injury by issuing and delivering any bonds based upon the invalid warrants for f30,000 issued by the board.

From the foregoing opinion, upon the various points presented and relied upon, it follows that the judgment of the district court must be affirmed. A~, ,

A~, Affirmed.

PembektoN, C. J., concurs.