DocketNumber: Appeal, 48
Citation Numbers: 143 A. 10, 293 Pa. 364, 1928 Pa. LEXIS 528
Judges: Moschzisker, Frazer, Walling, Simpson, Kephart, Sadler, Schaffer
Filed Date: 3/13/1928
Status: Precedential
Modified Date: 11/13/2024
Argued March 13, 1928. The township sued to recover from defendant a bank deposit of $20,181.28, with interest from February 28, 1927. This sum had been deposited in the name of Georges Township Road Supervisors by their treasurer, named as of the year in office. Defendant, in its affidavit of defense, answered that plaintiff was indebted *Page 368 to it in the sum of $7,000, evidenced by its note or certificate of indebtedness, dated June 30, 1922, which amount was charged against plaintiff when its account was balanced. The note or certificate was surrendered, together with other orders and checks and charged against the plaintiff's account. The indebtedness was incurred by the township for its corporate uses and purposes, — to repair and improve roads, — the money having been borrowed on the credit of the township in anticipation of taxes then to be collected. The loan and the note were authorized by resolution of the supervisors regularly enacted, and the charge against the bank account was with the knowledge, consent and agreement of its supervisors. Like defense was made for another note of $10,000, held by defendant; both notes with interest charges reduced plaintiff's balance to $58.53, which sum was admitted to be due. Plaintiff moved for judgment for want of a sufficient affidavit of defense. The court directed judgment for the plaintiff for the following reasons, (1) a previous appropriation and an earmarked fund which could be drawn from the bank only on an order (which was not given) and for the purpose for which the money was raised, and (2) the pleadings did not contain copies of the exhibits relied on. The motion also charged that the certificates or notes did not evidence legal obligations payable by plaintiff.
Because of the scope of the pleadings and the positions assumed in the motion, with the action of the court thereon, it will be necessary to discuss briefly the law with respect to the financial affairs of townships of this class. The first inquiry, naturally, is whether the notes are valid obligations, given under competent authority.
Generally speaking, a township, like any other municipality or quasi municipal body, may act only through powers that have been conferred on them by the legislature, or a necessary implication of power associated with a given function. When a municipality desires to *Page 369 create a debt or borrow money, there must be some antecedent legislative authority either direct or implied from the necessity of performing a duty which must involve the spending of money. The Township Code of 1917, P. L. 840, section 385, defines generally the powers of townships, and confers the power "to make any contract necessary to carry into execution the provisions of this act." This merely restates the law as it existed prior to the act.
Second-class townships are not clothed with the general powers given to cities, boroughs and first-class townships. Consequently, this general power to borrow money is limited by the code and other legislation. But within their specific functions, however, their authority is equal to other municipalities.
The limitations on all municipalities to the power to create a debt or borrow money are as follows: First, there must be a lawful purpose for which the money is to be used or the debt created, and, second, the amount which can be borrowed is determined by reference to (a) the current revenues due or created within the year, and (b) the constitutional percentage authorized on the assessment value of property. The procedure necessary to give effect to the borrowing power is not an incident of the power, but a regulation for its proper exercise. The purpose for which money is to be used, or a debt is to be created, may be ascertained from the authorizing acts, or duty enjoined or necessarily implied therefrom. In this case it is alleged that the notes were given for loans incurred for the repair and improvement of public roads. This is a proper purpose for which money can be borrowed, or a debt created, if the notes are valid obligations in other respects as well.
Money borrowed for current expenses must be a sum within the current revenues. Current revenues include taxes for the ensuing year and all liquid assets, such as delinquent taxes, licenses, fines and other revenues which, in the judgment of the authorities, are collectible. *Page 370
Current expenses have first claim on ordinary revenue and contemplate operating expenses, such as repair and maintenance of highways, lighting streets and other like ones. The sections of the code authorizing the levy of taxes (sections 421 and 422) would seem to indicate that, except as there mentioned, permanent improvements should not be paid for out of current revenues or the receipt of taxes levied for current purposes. But, if the levy is within that fixed by law, and there is a balance of current revenues over expenses and lawful loans made on account of such expenses, there is no reason why such a surplus should not be used for permanent improvements: Ackerman v. Buchman,
Section 422 of the code makes it possible, through the court of quarter sessions, to levy a special tax for a debt that has been contracted exceeding in amount the revenues which the supervisors may collect in any year by taxation. This might be construed as being an implied authority to create a debt in any year beyond the current revenues, but, as this is a redraft of the Act of 1864, P. L. 162, it would not disturb the decisions under that act, hereinafter discussed. Except in cases of extraordinary emergency, and those under section 436, the provision of this section would not have the effect of authorizing debts beyond present revenues.
Section 436 of the code states that, when township highway funds have been exhausted, the supervisors may issue certificates of indebtedness and borrow on the credit of the township in anticipation of taxes to the end that the work may be performed in the proper season. This section must be confined to its proper subject-matter, which provides for work to be done to secure state reward for maintenance of township roads. The work is seasonal, and the borrowing power is limited to (1) 2% of the valuation, and (2) revenues or taxes contemplated or anticipated in the current year. It did not *Page 371
intend to appropriate all future revenues, and such revenues taken should be specifically named: McAnulty v. City of Pittsburgh,
It was early stated that, where the debt created in any year exceeded current revenues, and could not be paid therefrom, the debt was void unless steps were taken to pay by bonds under what is termed the constitutional provision. The Constitution was intended to prevent the citizens from being overburdened by municipal taxation: City of Erie,
As illustrating the limitations on borrowing or creating a debt within revenue limits, and the difference between running expenses and permanent improvements, the following cases may be cited: In City of Erie, supra, a city leased a market house for 25 years at a given sum per year. Apparently, the rent could not be paid from the current revenue. The court said the municipality must learn to live within its revenues. When a contract made by the municipality pertains to its ordinary expenses within the limits of its current revenue, then such special tax as it may legally and in good faith levy for such contract does not constitute the incurring of indebtedness within the constitutional provision. If the contracts do notoverreach the current revenues, no objection can be made tothem, however great the indebtedness may be. But since it did not appear from the record that the contract in question was within the current revenues, and could not be sustained *Page 372
within the constitutional levy, it was held void. In Wade v. The Borough,
An exception to this rule was expressed in Addyston Pipe
Steel Co. v. City of Corry,
Applying the foregoing principles as to current revenue to the facts in this case, it will be seen that many situations are present under any one of which the notes may be sustained. If the loan for which the notes were given was made for repairs to roads, within the current revenues, and the answer avers that it was, it is evident the note would be valid, as there is nothing else in the record to show that the loans exceeded such revenues. The fact that one or more of the notes were renewals of a prior one would not make the renewal notes invalid if the original note was lawfully created. As stated in Addyston Pipe Steel Co. v. City of Corry, supra, "The validity of the obligation is to be determined at the time it was made."
The answer also avers that the loans were for improvements. This brings up consideration of (b) or the constitutional percentage. Money borrowed or debts created for permanent improvements, such as improved roads or public buildings, must not exceed the constitutional limit. "Permanent improvements," as the term is ordinarily understood, are usually made from loans in the constitutional class. The deposit, for all that appears in plaintiff's statement, might well be from such loan. The Act of April 28, 1915, P. L. 195, governs the two per cent limit loans in that class. A debt may be incurred or money borrowed by resolution without electoral approval for any lawful purpose up to two per cent. The form of this indebtedness is coupon bonds or other securities, which would include notes or certificates of indebtedness, and the regulations set forth in the act *Page 374
should be complied with: Boro. of Rainsburg v. Fyan,
The affidavit does not show the class of the indebtedness, but avers that it was incurred for corporate purposes by resolutions duly enacted. Whether the loan is within current revenues or in the constitutional class, the validity of the loan is not denied in the pleadings, and the presumption would be that the township supervisors, as public officers, had regularly performed their official duty in issuing the notes: Vernon Twp. v. United Natural Gas Co.,
Was there a prior appropriation of the money on deposit? The weakness in plaintiff's case comes from its statement: Parry v. Bank,
The act requires money to be paid out by the treasurer on orders signed by at least two supervisors. Many of these orders pass through the banks as checks. The order in strictness is addressed to the treasurer who, when they are presented to him, issues his own check in favor of the persons or the banks who may hold them, to cover the amount called for therein. There is nothing in the act which defines what the order shall contain, but the Township Code in section 287 states that the state highway commissioner shall furnish blanks. This is a redraft of legislation in effect since the Act of 1834, P. L. 537, the part under discussion coming from the Act of June 11, 1915, P. L. 947. Any writing, signed by the proper authorities, directing money to be paid or agreeing to pay presently or in the future, would be an order within the contemplation of the act. It would not be an invalid payment merely because payment was made on a blank not issued by the state highway commissioner, or if money lawfully due was paid without such order. We do not have before us the form of the note or certificate of indebtedness, but, if it was in the usual form, we see no reason why it should not measure up to the standard required. Assuming the note measured to the dignity of an order, judgment should not have been entered because of the failure to produce an order. Moreover, in this case the township authorities, when the books were balanced, recognized the notes as being a sufficient *Page 377 order, accepted, approved and ratified them. Where a debt has been lawfully contracted for and an imperfect order or direction for payment given, the supervisors may later ratify the act of payment. It was when the new board of supervisors took office that these matters, extending over years, were questioned.
Another question should be touched on, though not specifically raised, but we will not decide it. The code provides for auditors who audit the accounts of these officers. The notes, or some of them, have been in existence for years. If there has been an illegal act or irregularity, why was it not determined long ago? The law adopts its own procedure to safeguard the funds of a municipality through surcharge of the officer responsible, with recourse to his bondsman. Should this proceeding have been against such officers, and, if this action can be maintained, may any employee engaged in repairing roads, tradesmen who sell articles for that purpose, and banks who furnish money to meet such demands, be called on to repay, rather than a proceeding against the officer and his bond? The record is in no shape for us to decide the question. Of course, if the bank, without justification or reason, unlawfully withholds money, a matter that could not properly come before auditors, it cannot keep the money, and the township may sue for it. But that is not the case, as the present record discloses.
Complaint is made that a copy of the resolutions, together with other matters necessary to make a valid loan, are not attached as exhibits by defendant in his affidavit; neither are the notes. Under the Practice Act of May 14, 1915, P. L. 483, it was necessary for him to attach to his pleadings copies of all contracts, etc., on which he relies for his claim, but it is not necessary to attach copies or other papers merely referred to but not essential to his cause of action: Harper v. Lukens,
In passing on the subject of borrowing powers and debts, we call attention to the Act of May 4, 1927, P. L. 707, section 421. As the case now stands, the question presented is for the jury. It does not show either conspiracy or any wrongdoing so far as the present record stands. The pleadings may be amended so as to raise the issues relied upon by plaintiff, and defendant has a *Page 379 similar right to amend. The case was certainly not one for summary judgment.
The judgment is reversed with a procedendo.
Jefferson County v. Rose Township , 283 Pa. 126 ( 1925 )
Appeal of the City of Erie , 1879 Pa. LEXIS 360 ( 1879 )
Commercial National Bank v. Henninger , 1884 Pa. LEXIS 134 ( 1884 )
Murdock v. Martin , 132 Pa. 86 ( 1890 )
Addyston Pipe & Steel Co. v. City of Corry , 197 Pa. 41 ( 1900 )
Potters National Bank v. Ohio Township , 260 Pa. 104 ( 1918 )
Ackerman v. Buchman , 109 Pa. 254 ( 1885 )
Hebb v. Kittanning Ins. , 138 Pa. 174 ( 1890 )
Wade v. Oakmont Borough , 165 Pa. 479 ( 1895 )
Keller v. Scranton , 200 Pa. 130 ( 1901 )
Lesser v. Warren Borough , 237 Pa. 501 ( 1912 )
Vernon Township v. United Natural Gas Co. , 256 Pa. 435 ( 1917 )
Parry v. First National Bank , 270 Pa. 556 ( 1921 )
Harper v. Lukens , 271 Pa. 144 ( 1921 )
Derr Lumber Co. v. Johnson , 1921 Pa. Super. LEXIS 75 ( 1921 )
Borough of Rainsburg v. Fyan , 127 Pa. 74 ( 1889 )
Brown v. City of Corry , 175 Pa. 528 ( 1896 )
McAnulty v. City of Pittsburgh , 284 Pa. 304 ( 1925 )
Schilling ex rel. First National Bank v. Ohio Township , 260 Pa. 113 ( 1918 )
Jackson v. Conneautville Borough School District , 280 Pa. 601 ( 1924 )
Scranton Electric Co. v. Old Forge Boro. , 309 Pa. 73 ( 1932 )
Commonwealth Ex Rel. Directors of Poor v. Gibson , 309 Pa. 323 ( 1932 )
Philadelphia & Reading Coal & Iron Co. v. Coal Township ... , 311 Pa. 236 ( 1933 )
Valley Dep. and Tr. Co. of Belle Vernon , 311 Pa. 495 ( 1933 )
Kelley v. Earle , 320 Pa. 449 ( 1935 )
Fleming v. Adamson , 321 Pa. 28 ( 1935 )
Pennsylvania Power & Light Co. v. City of Bethlehem , 323 Pa. 313 ( 1936 )
Luftheizungs Und Abgasverwertungs v. Rys , 330 Pa. 117 ( 1938 )
Falkinburg v. Venango Township , 297 Pa. 358 ( 1929 )
Hillman Coal & Coke Co. v. Jenner Township , 300 Pa. 108 ( 1930 )
Greenhalgh v. Woolworth , 361 Pa. 543 ( 1949 )
Independent Consolidated School District of Dow City v. ... , 232 Iowa 506 ( 1941 )
Kelley v. Baldwin, Auditor General , 319 Pa. 53 ( 1935 )
Miners S. Bank v. Duryea Borough , 331 Pa. 458 ( 1938 )
Ohlinger v. Maidencreek Township , 312 Pa. 289 ( 1933 )
Galion Iron Works & Mfg. Co. v. Hollenback Twp. , 297 Pa. 68 ( 1929 )
Athens National Bank v. Ridgebury Township , 303 Pa. 479 ( 1931 )
First National Bank v. Carroll Township , 150 Pa. Super. 241 ( 1942 )
Great Northern Railway Co. v. Glover , 194 Wash. 146 ( 1938 )