Helena Water Works Co. v. City of Helena

MR. JUSTICE MILBURN

delivered the' opinion of tbe court.

On April 4, 1901, plaintiff commenced an action in the district court to enjoin defendants from allowing or ordering paid any claims or demands presented for materials furnished or services rendered to said city during the time that it has been or may be indebted in excess of 3 per centum of the assessed value of the taxable property, as ascertained by the last assessment, such excess being admitted. Plaintiff excepted expressly from its prayer any desire to have the city enjoined from paying certain claims of plaintiff for water furnished and to be furnished to said city.

The pleadings and proofs are so voluminous, and there is so much repetition in them, that we shall not set them out in full.

On December 17, 1900, this court, in the case of State ex rel. Helena Water Works Co. v. City of Helena, 24 Mont. 521, 63 Pac. 99, 55 L. R. A. 336, 81 Am. St. Rep. 453 (hereinafter referred to as the “Helena Case”), held that a certain contract made by the city with the company to furnish water wás void. There were two questions answered by the court in that case: (1) “Did the city of Helena, by entering into the contract for a water supply, incur an indebtedness/ within the meaning of that term as it is used in Section 6 of Article XIII of the Constitution of Montana?” and (2) “Does the amount now due and unpaid for water furnished to- the city under the contract before us constitute an indebtedness/ within the meaning of the term as used in that section of the constitution above considered ?” Said Section 6 of Article XIII of the Constitution, above referred to is as follows: “No city, town, township or school district shall be allowed to become indebted in any manner or for any purpose to an amount, including existing indebtedness, in the aggregate exceeding three per centum of the value of the taxable property therein, to be ascertained by the last assessment for the state and county taxes previous to the incurring of such indebtedness, and all bonds or obligations in excess of such amount given by or on behalf of such city, town, township or school district shall be void: provided, hoxoever, that the legislative assembly may extend the limit mentioned in this section, by authorizing municipal corporations to submit the question to a vote of the taxpayers affected thereby, when such increase is necessary to construct a sewerage system or to. procure a supply of water for such municipality which shall own and control said water supply and devote the revenues derived therefrom to the payment of the debt.” Each question was, in the opinion referred to, answered in the affirmative. The court added, obiter, certain suggestions to the city as to how it might continue to do business and pay out money for “necessities to sustain corporate life.” It appears that the city, acting upon these suggestions, has endeavored to operate on what is termed, in the remarks of the court made obiter and in the bidefs of counsel, as the “pay-as-you-go plan.” It was admitted that at the times referred to in the Helena Case the city was indebted beyond the constitutional limit.

Since the date of the decision of this court in the case referred to, the city has, it alleges, employed men and purchased materials with the understanding that the parties with whom it dealt should not and would not hold the city liable or responsible in any degree for the stipulated value of the services or materials, but would accept warrants upon the city treasurer, drawn in the usual form, as shown in the exhibits in the evidence; the city having by an ordinance made an appropriation of sufficient funds to meet all expenses when they should arise; no warrant to be drawn unless there should be actual cash in the treasury to meet such warrants. The city also asserts (and there is some proof to support the assertion) that there was and is an understanding with all creditors that the ivarrant should be and would be accepted as cash, and that the city should not be responsible if the treasurer should, for any reason, fail to pay the warrant. It is alleged, in effect, also, that the said appropriation by ordinance is an assignment of funds for the payment of such claims. There is a reference to a city library fund, raised by a specially authorized tax, and to debts' incurred and to be paid out of such fund. •

The plaintiff alleges that the services and materials were rendered and furnisbed without any understanding’ that the creditors would accept an assignment of the taxes to be levied, or an assignment of any fund in the treasury in payment of such claims, and that no such assignment was ever made. Plaintiff alleges enough to show it to be a party in interest.

The Political Code, in Sections 4811 and 4812, which axe as follows,- — -“Sec. 4811. All accounts and demands against a city or town must be submitted to the council, and if found correct must be allowed, and an order made that the demand be paid, upon which the mayor must draw a warrant upon the treasurer in favor of the owner, specifying for what purpose and by what authority it is issued, and out of what fund it is to be paid, and the treasurer must pay the same out of the proper fund. Sec. 4812. All accounts and demands against a city or town must be presented to the council, duly itemized and accompanied by an affidavit of the party or his. agent, stating the same to be a true and correct account against the city or town for the full amount for which the same is presented, and that the same accrued as set forth, and with all necessary and proper vouchers, within one year from the date the sarnie accrued; and any claim or demand not so presented within the time aforesaid is forever barred, and the council has no authority to allow any account or demand not so presented, nor must any action be maintained against the city or town for or on account of any demand or claim against the same, until such demand or claim has first been presented to the council for action thereon,” — prevents the city being, put on a cash basis, or on a pay-as-you-go- plan, such as suggested by the city as its intention to establish. The Code requires the city council to audit'all claims and demands evidenced by itemized bills, sworn to, before any payment is made. A claim is presented, and after an auditing (that is, a hearing) by the guardians of the city treasury, not of' other people’s money, already assigned and set over to themi, the account is allowed and ordered to be paid, if these guardians find that there is a debt against the city which is due and payable. In no other way may a claim against a city be paid. If 'the servico and material men°have no demands against the city, as com tended by the city in the present case, and they do not claim that the city is indebted to them, then they may not file claims with the council for allowance and payment, and they can never get a cent. The city does not owe them anything, and the council has no business to hear them, or to order any warrant to issue for payment. If there be indebtedness, and the city is the one indebted, then the claimants shall so swear, and have their demands audited and established as part of the indebtedness of the city. Such is the law, and such is the only conclusion to be drawn from the reading of the law. As we have said, in no other way can a claim be established and paid, as the law now stands. Expediency and emergencies arising out of extravagance or misfortune have, we think, led and forced city officials in Montana and elsewhere to adopt a plan such as suggested by counsel.

If the law did not require indebtedness to be first incurred, and thereafter to be found in the way fixed by the Code, sufra., then, with money to pay on hand, there could be instantaneous cash transactions, perhaps such, and under such conditions, as would not create debts.

The Great Falls Case (State ex rel. Great Falls Water Works v. City of Great Falls, 19 Mont. 518, 49 Pac. 15) is not in point as an authority in support of the contention of the defendants in the case at bar. That case is authority for the proposition that a contract does not create an indebtedness, such as is prohibited by the constitution, when the city making the com tract is authorized by statute to levy a special tax expressly for the payment of such contract liability. In such a case the liability is special, and is limited to the amount of the special tax levied, and the property and the credit of the city are not liable to' the creditor holding claims payable out of that tax. The city library fund, referred to in the pleadings, is raised by special tax for library purposes. The liabilities referred to in the case under consideration now, and the payment of which the plaintiff seeks to enjoin, are general, and the city cannot escape liability by itself appropriating general funds and calling such an appropriation an “assignment-.” This is clear from the reasoning of the opinion rendered by this court in the Helena Gase. which opinion we have no idea should be disapproved. The learned justice who wrote that opinion went exhaustively into the matter, and compared the many authorities bearing upon the subject, both those of our own court and those of other courts of last resort, and said: “In view of these holdings, we can conceive of no possible ground for the supposed distinction between an indebtedness for current expenses, payable out of the current revenues, and one for the payment of which no provision has been made, and for which the city is generally liable.”

-It is not for us to suggest to unfortunate cities or people how they may escape the consequences of misfortune or extravagance. We are to declare the law as we find it.

The court below erred in refusing the injunction prayed for. Such injunction should not prevent the city from paying all valid claims against funds raised by tax! especially authorized by law for the purpose of paying such claims. No other logical conclusion can be arrived at after reading the Code, supra, and the decision in the Helena Gase. The question of the validity or nonvalidity of the claims of plaintiff against the city, referred to in the pleading's, is not before us for decision.

Reversed and remanded.