Case ID: iowa_136/html/0191-01.html
Source: Caselaw Access Project
Author: {"author": "Deemer, J.,", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Nancy Reed, Appellant, v. The City of Cedar Rapids et al., Appellees.
    1 Municipal Corporations: special charter cities: limit of indebtedness. Chapter 49 of the Acts of the 31st General Assembly, limiting municipal indebtedness to 1J4 per cent, ot the actual value of taxable property within'the corporation, has no application to the cities acting under special charter, but they are governed by the constitutional limitation of 5 per centum.
    2 Borrowing money. The council of a special charter city, when authorized by a vote of the electors, has power to borrow money for the erection-of a City Hall and as incident thereto may issue proper evidences of such loan.
    3 Same: issuance of negotiable bonds. A special charter city cannot issue long time negotiable bonds as evidence of money borrowed' for any purpose without express' authority from the legislature.
    
      Appeal from Gedar Rapids Superior Court.— HoN. James II. Rothroce, Judge.
    Thursday, November 14, 1907.
    Suit in equity to enjoin defendants from issuing, delivering and selling a bond issue of tbe said city to tbe amount of $125,000. Tbe trial court dismissed tbe petition and plaintiff appeals.
    
      Reversed and remanded.
    
    
      John A. Reed, for appellant.
    
      Jas. W. Good and II. E. Spangler, for appellee.
   Deemer, J.,

Pursuant to vote of tbe electors of tbe defendant city of Cedar Rapids, wbicb is a special charter city, and to resolutions and orders of tbe city council, tbe defendant bas issued $125,000 in negotiable bonds for tbe purpose of building a city ball, and through its treasurer is offering tbe same for sale upon sealed proposals. Tbis action is to restrain tbe sale and delivery of tbe bonds, and tbe questions presented are succinctly stated by appellant’s counsel in these words: “ (1) Does section 54. of tbe city charter authorize the city to borrow money for tbe purpose of building a city hall and to issue bonds therefor ? (2) Has tbe city authority to issue negotiable bonds or bonds in tbe form specified by Ordinance No. 163? (3) Does chapter 49 of tbe Acts of tbe Thirty-first General Assembly apply to cities acting under special charter, and limit tbe indebtedness of special charter cities to 1% per centum of tbe actual value of tbe taxable property within tbe city ? ”

Tbe value of tbe taxable property within tbe city is $19,885,085, and its indebtedness at tbe time tbe bonds in question were- issued, while not agreed to by the parties to this litigation, may for the purposes of the case be treated as $700,000. Chapter 49, Acts 31st General Assembly, provides, in substance, that m> municipal corporation shall be allowed to become indebted to an amount exceeding in the aggregate the amount of 1% per centum of the actual value of the taxable property within such corporation; the amount of such taxable property to be ascertained by the last State and county tax list previous to the incurring of such indebtedness. If this act applies to special charter cities, then the bond issue in question is in excess of the amount for which the defendant city may become indebted. By section 933 of the Code, it is provided, in substance, that no laws relating to the powers, duties, liabilities, or obligations of cities or towns shall in any manner affect or be construed to affect cities while acting under special charters, unless the same have special reference to or are made applicable to such cities. Chapter 49, Acts 31st General Assembly, repealed chapter 43, Acts 30th General Assembly, which amended section 1306b of the Code Supplement of' 1902, and this expressly included special charter cities. But the act in question makes no reference to such cities, and this omission is of great significance in arriving at the legislative intent and purpose. It is clear, we think, that chapter 49, 31st General Assembly, has no reference to special charter cities, and that the only limitation upon the amount of indebtedness which they may incur is the constitutional one of 5 per centum upon the taxable value, which in special charter cities is the actual value. See article 11, section 3, Constitution, and Halsey v. Belle Plaine, 128 Iowa, 467. This being true, the bonds were not in excess of either statutory or constitutional limitation.

II. By section 54 of the charter of defendant city, it is provided: “ The said city council is hereby authorized to borrow money for any object or purpose in their discretion, and to pledge the faith of the city for the payment thereof, provided the question of borrowing is first submitted to the legal and qualified voters of the city, a notice of the length of time, as in city elections, being first given, stating the manner and object of the loan, and if a majority decide in favor of said loan, then the said council shall by ordinance establish a sinking fund to provide the means to pay any indebtedness created by virtue of the authority granted in this section.” As all the preliminary and requisite steps provided for in this section were taken, it is manifest that the city had express power to borrow money, and, as a necessary incident thereto, it could issue proper evidences of such loan to the person or persons making it.

III. The remaining question is: • Had it authority to issue, sell, and negotiate long-time negotiable bonds? This question is not free from difficulty, and the various courts of the country are not agreed upon the proposition. The trial court found that the present city hall is inadequate and totally unfit for the purposes for which it is used, and for the needs of the defendant city; that it is unhealthy and unsanitary; that the records 1of the city are in danger of being lost, destroyed, or stolen; that the object of the city of Cedar Eapids can be best attained, and its records and valuable papers made safe and secure, by building a new city hall,” and with this conclusion we are agreed. The ordinance authorizing the issuing of these bonds provided that “ the proceeds of said bonds shall be used only for the purpose of paying for the erection of the city hall, to be erected on lots one (1) and two (2) block thirteen (13), original town, now city, of Cedar Eapids, Iowa, and only then when directed and ordered by resolution of the city council of said city. The receipt of the treasurer of the city of Cedar Eapids, to the purchaser of said bonds, shall be a full acquittance to such purchaser for the purchase of said bonds.” Section 5: “ That there be and is hereby established a fund to be known as the * City Hall Fund/ and the proceeds of the sale of bonds hereby authorized shall be credited to the city hall fund,, as the expenses of the erection of the city hall shall be paid from said fund.”

“ Section 6: The city council shall levy once each year, at the same time, and in the same manner as levying assessments for other taxes for city purposes an assessment upon all taxable property within the city of Cedar Rapids, an amount sufficient in the aggregate to meet the payments of interest on said bonds hereby authorized and in addition thereto an amount sufficient to pay five thousand ($5,000) dollars, per year upon the principal of the bonds hereby authorized, and to pay and retire the bonds hereby authorized as they severally become due and payable. When such bonds are issued they shall be delivered to the recorder, who shall register the same in a book to be kept for that purpose, countersign them and deliver them to the city treasurer. Said bonds may be sold at public or private sale, but shall not be sold or negotiated for less than their par value, with accrued interest from their date to the time of delivery thereof. All moneys received by the treasurer of said city for the sale of said bonds, and on account 'of taxes levied and assessed for the payment thereof, shall be credited by the treasurer of said city to said city hall fund, and all payments made in the erection of said city hall, and the payments of interest and principal on said bonds, shall be charged to said fund. If any interest shall become due at any time on any of said bonds, when there is no fund from which to pay the same, the council may make a temporary loan for the payment thereof, which shall be repaid from taxes assessed and collected belonging to said fund.”

It appears that the treasurer had contracted to sell the bonds at par, and at the time this action was commenced he was authorized to close the contract. These matters are referred to because of appellee’s insistence that they have some bearing upon the question now before us, in that the indebtedness is created for a permanent improvement which will benefit, not only the present generation, but posterity as well; and that the funds derived from the sale of tbe bonds are properly safeguarded. We do not regard these matters controlling, however, for the question, after all, is: “ May a municipal corporation issue negotiable bonds without express authority from the Legislature so to do ? ” That question seems to be foreclosed by our previous cases. See Heins v. Lincoln, 102 Iowa, 69; Witter v. Board, 112 Iowa, 380; Swanson v. City of Ottumwa, 131 Iowa, 540, and cases cited. The question is very fully considered in these cases, and the conclusion reached that, in the absence of express authority, a city has no power to issue long-time negotiable bonds, no matter for what purpose the issue is proposed. We are not disposed at this time to depart from these holdings. Wherever the Legislature has thought'it necessary to clothe municipalities with this power it has done so hy express statute, and has apparently left nothing to implication. The Iieins-Lincoln case discusses the very provision of the charter now before us, and the Witter case was one where the municipality was securing a permanent site for its court house. No matter what our views regarding the expediency of issuing such bonds, we cannot without changing the rule for this State and overruling the cases hitherto cited approve the issuance by a municipality of negotiable bonds without express authority from the Legislature so to do. It follows that the decree of the superior court must be, and it is, reversed, and the cause remanded for one in harmony with this opinion.— Reversed and remanded.