Case ID: monaghan_1/html/0329-01.html
Source: Caselaw Access Project
Author: {"author": "Sterrett, J.,", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Luburg’s Appeal. [Luburg v. Miller et al.]
    A bill in equity by a taxpayer against school directors and others averred that the school directors had entered into a contract, without the assent of electors, to build a school house at a cost in excess of two per centum of the assessed value of the taxable property in the district, contrary to article IX, $ 8, of the constitution. The court granted a preliminary injunction. The answer averred that the school district was authorized by decree of court “ to borrow the money for the purpose of erecting the schoolhouse, a portion of which it is proposed to expend ” for that purpose, and that the tax of one per centum, authorized by law to be assessed, when applied to the erection of the schoolhouse, will enable the school district to perform the contract without an increase of indebtedness within the meaning of the constitution. The court below, holding that, as the loan had been made, and as the contracts of the school district did not exceed the means of payment, no debt was created, dissolved the preliminary injunction. Held to be error.
    Steerett, J. — It is not distinctly averred in the answer or in any manner shown, that the loan has been actually placed and it cannot be inferred from an evasively worded answer. But, as the order of the court authorizing the loan was illegal, the bonds are worthless, and there is nothing to prevent the-holders of such bonds from demanding restitution.
    In an answer to a bill in equity, neiv matter set up, in confession and avoidance, is not responsive, and is, therefore, not to he considered upon a motion to dissolve a preliminary injunction.
    An averment based on information and belief, in an answer to a bill in equity, is not evidence, but is pleading merely, and puts in issue the facts in dispute.
    The answer to the bill in the above ease averred that the defendants believed,, from information received, that the plaintiff had knowledge that such a contract was being entered into, and permitted the defendants to proceed with the performance thereof without protest, his conduct thus operating as an estoppel of his right to complain. Held, that such averment was not sufficient to authorize a dissolution of the preliminary injunction.
    March 6, 1889.
    Appeal, No. 99, Jan. T. 1889, from a decree of ■C. P. Berks Co., dissolving a preliminary injunction granted on a bill in equity by A. F. Luburg against B. J. M. Miller et al., school directors, the School District of the Borough of Hamburg, Longlow & Bro. and Martin H. Motes, at Oct. T. 1888. Green and Clark, JJ., absent.
    The bill averred substantially as follows: 1. The plaintiff is a ■citizen and taxpayer of the school district of Hamburg. 2, 3. Bichard J. M. Miller and others, school directors of said district, have purchased a lot of ground for $2,500, with a view to erecting a schoolhouse thereon, which lot is low and damp. 4. The school directors have undertaken to make a contract with Longlow & Bro. and Martin H. Motes, for the erection of a schoolhouse on the lot at an aggregate cost of upward of $20,000, thus increasing the indebtedness of the district to that amount. 5. The amount to which the indebtedness was so increased exceeds two per centum upon the aggregate assessed valuation of taxable property in the school district, which aggregate valuation is $629,989. 6. The assent of the electors ■of the district to such increase of indebtedness was not previously secured at a public election, as provided by § 8 of article ix of the •constitution of Pennsylvania. 7. The contract is illegal and void, and, if permitted to be carried out, will oblige the plaintiff and •other property-owners to pay taxes which they ought not to pay, and will do them irreparable injury.
    The bill prayed the court to decree: 1. That the said contract is void. 2. That neither the said contract, nor the performance of work under it, will impose any obligation upon the district or the taxpayers thereof, to pay any monies. 3. “ That the defendants be restrained, preliminarily until hearing and perpetually thereafter, from proceeding further in the performance of any of the terms of the said alleged contract.” 4. General relief.
    The answer of the school directors admitted that the plaintiff is a citizen, taxpayer, and owner of real estate, and that the said parties are school directors. It denied that the lot is low and damp, and ••alleged that it is suitable for school purposes. It denied the making of a contract with Longlow & Bro. and Motes, but admitted the making of a contract with Longlow and Motes for the erection of a school house at a cost of $18,050, the contract being dated October 9, 1888, and that the said contract was made in pursuance of proposals invited by publication.
    The defendants, in their answer, further averred that “ they verily believe from information received, that said plaintiff had knowledge of the action of these defendants with reference to the •same, and that they were about to enter into said contract; and at no time made any protest against their proposed action, but'permit-Ted them to proceed with the same and incur habilities, and make ■expenditures for and on account of the same. We admit the facts relating to the contract for heating apparatus, and state that we have ■expended and paid, on account thereof, the sum of $225.
    “We admit that the aggregate assessed valuation of taxable property in the school district of the borough of Hamburg is $629,989, and that two per centum upon the same is $12,599.18. We deny, however, that our action, as set forth in paragraph 4 of plaintiff’s bill, will increase the indebtedness of the said school district, ‘ to an amount exceeding two per centum upon such assessed valuation of property,’ as is contemplated or provided in section 8 of article ix of the constitution of this commonwealth; or that it will at all, and to any amount, increase the debt of said school district, contrary to said provision of the constitution of this commonwealth ; the said school district having been duly authorized by ■decree of your Honorable Court theretofore, to wit: on the 18th day ■of August, 1888, to borrow the sum of $25,000 for the purpose of ■erecting a school house, a portion of which said sum it is proposed to ■expend and appropriate to the purposes as set forth in paragraph 4 ■of plaintiff’s bill, that being the purpose for which the said loan was authorized by your Honorable Court as aforesaid: they are advised, believe, and so state that they are duly authorized and empowered by law to appropriate and expend the same in performing the covenants of the contract set forth in paragraph 4 of plaintiff’s bill. Moreover, they say that they are authorized and empowered, by law, to levy, annually, a special tax not exceeding one per centum of the aggregate assessed valuation of taxable property in said school district, which will amount annually to the sum of $6,299.89 ; and that the school district aforesaid was indebted in the sum of $2,000, when your Honorable Court so authorized the defendants to make the loan as aforesaid ; and that the aggregate sum of said special tax, which the defendants are authorized and empowered to levy as aforesaid for two years, added to two per centum of the aggregate assessed valuation of taxable property in the said school district, will much exceed the sum contracted and agreed to be paid for the erection and completion of said school house; and they are advised, believe and so state, that, being so invested with the power and authority to levy and collect annually the special tax as aforesaid, which when levied and collected can lawfully be applied only to the purposes for and about which said contract was made and entered into, the said school district can lawfully provide the money to enable it to perform the covenants in said contract, without incurring or contracting a permanent indebtedness within the meaning of the constitutional provision limiting the power of school districts to contract debts, to wit: section 8, of article ix, of the constitution of this commonwealth; without this, that the defendants had not previously been authorized by decree of your Honorable Court, to borrow the sum of $25,000 for the piirposes hereinbefore stated.”
    They further admitted that the electors of the said district have not, at a public election, voted upon the question of increasing the-debt, but that a majority of ■ them signed the petition upon which the said court authorized the borrowing of $25,000 as aforesaid-Proper notice was given of their intention to present the said petition to court. Neither the plaintiff nor any elector or taxpayer-made any objection to the said application for leave to borrow, and thereby consented thereto.
    The answer further averred that the plaintiff well knew that the-loan of $25,000 was authorized, and that defendants were expending such money in payment of bonds previously issued for the-purchase of land, and suffered them to enter into said contract, and pennitted them to proceed with the performance thereof and incur liabilities on account of the same, whereby the plaintiff is equitably estopped from questioning the right of the defendants to perform, the said contract.
    They denied that the contract is void, and will oblige taxpayers-to pay taxes which they ought not to pay, and that it will do them irreparable injury, and this for the reasons stated in the previous-portion of the answer.
    Longlow and Motes also filed answers. No replication was-filed.
    The court, áfter hearing, dissolved the preliminary injunction,, in the following opinion, by Ermentrout, J.:
    “ The answer filed is sufficiently responsive to the plaintiff’s bill, and, in view of the statements therein set forth, we do not think the constitutional prohibition of § 8, of article ix, is applicable to this case.
    
      “ The school district of the borough of Hamburg is not seeking a new loan, nor incurring a new debt, nor increasing its indebtedness. The loan has already been made in accordance with the order of the court of August 18, 1888. Although this loan was made contrary to the provisions of said section 8, it does not follow that the holders of the securities are prejudiced, or that the school district may not expend in a lawful way the proceeds of the loan then obtained. No question of validity of the securities in the hands of innocent holders for value is raised by the record. The answer denies the incurring of the new debt or the making of a new loan.
    “ The building of school houses and their location are peculiarly within the discretion oí the board of directors of the school district. We see nothing unlawful in the contracts made, nor is any abuse of official discretion alleged. In pursuance of the terms of the contract, the contractors have already begun operations and incurred great expense. We see no ground for equitable interference. We therefore dissolve the injunction, for the following reasons :
    “1. No new debt is created. The school district may, for lawful purposes, expend the loan made.
    
      “ When a contract made by a municipal corporation pertains to its ordinary expenses, and is, together with other like expenses, within the limit of its current revenues, and such special taxes as it may legally and in good faith intend to levy therefor, such contract •does not constitute the incurring of an indebtedness within the meaning of the constitutional provision. If contracts and engagements of municipal corporations do not overreach their current revenues, no objection can be lawfully made to them, however great the indebtedness of such municipality may be, for in such case their ■engagements do not extend beyond their present means of payment, .ana so no debt is created. Appeal of City of Erie, 91 Pa. 398; Lehigh Coal and Navigation Co.’s Appeal, 112 Pa. 368.
    “ 2. Under the facts in the answer, the plaintiff is estopped from alleging the constitutionality of the proceedings in question. That a citizen may waive his constitutional rights and be estopped from asserting them is quite plain. Among the cases directly upon this point are: Bidwell v. City of Pittsburgh, 85 Pa. 414; McKnight v. City of Pittsburgh, 91 Pa. 275; 2 Herman on Estoppel, §§ 733, 1063, 1221; 2 Pomeroy’s Eq. Jur., §§ 818 and 819.
    “And now, to wit, November 8, 1888, this cause came on further to be heard, upon answer filed, and motion to dissolve the injunction upon the filing of the answer, whereupon it is ordered, .adjudged, and decreed that the injunction be dissolved.”
    
      The assignments of error specified the action of the court, 1, in refusing to award a preliminary injunction, until hearing, as prayed for, quoting the 3d prayer of the bill; 2, in not continuing the preliminary injunction until final hearing; and, 3, in dissolving the preliminary injunction.
    
      C. G. Derr, with him Geo. F. Hagenman, for appellant.
    The defendants set up new matter in their answer, and this will not be considered upon a motion to dissolve a preliminary injunction. Pusey v. Wright, 31 Pa. 395; Eaton’s Ap., 66 Pa. 490; Daniel’s Chancery Practice, 845; High on Injunctions, § 883.
    The fact upon which the estoppel was based, is averred on information and belief. This is not evidence, but pleading. Eaton’s Ap., 66 Pa. 490.
    The mere silence of the plaintiff cannot be held to have estopped him. The cases cited by the court below on this subject are inapplicable.
    The finding of fact by the court below that the loan of $25,000 had been already made was not justified by the answers.
    The court below was in error in holding that the bonds were valid in the hands of innocent holders. Borough of Millerstown v. Frederick, 114 Pa. 435; Pike County v. Rowland, 94 Pa. 238; Ackerman v. Buchman, 109 Pa. 254; WilkesBarre’s Ap., 109 Pa. 554.
    The bonds being worthless, the holders were entitled to have their money returned. The money in the treasury therefore belonged to the bondholders.
    
      C. H. Ruhl, with him Daniel Ermentrout and J. Ed. Miller, 
      for appellees.
    Whatever matters in the answers are responsive to the averments in plaintiff’s bill, must be taken to be true, and must therefore prevail, no replication having been filed, or proof submitted in support of the bill. Russell’s Ap., 34 Pa. 261; Glemmer’s Ap., 58 Pa. 156; Eaton’s Ap., 66 Pa. 490; Pusey v. Wright, 31 Pa. 395.
    If the bonds are void, plaintiff, as a taxpayer, could not be-injured, and he has no status here. R. R. Co.’s Ap., 62 Pa. 218; Coal Co. v. L. N. Co., 50 Pa. 91.
    The defendants could levy two per cent, of the assessed valuation without authority from the electors. They could also levy one per cent, under the general school laws. These two amounts combined were less than the price of the school house. City of Erie’s Ap., 91 Pa. 403; Lehigh Coal & Nav. Co.’s Ap., 112 Pa. 369; 1 Dillon on Municipal Corp. § 88.
    The plaintiff was estopped from objecting to the contract. Pickard v. Sears, 6 A. & E. 469; Bidwell v. Pittsburgh, 85 Pa. 418; McKnight v. Pittsburgh, 91 Pa. 273; Herman on Estoppel, §§ 1063, 1261; 2 Pomeroy’s Eq., § 818; Bisph. Eq. § 290; Cooley Const. Lim. *181.
    March 25, 1889.
   Sterrett, J.,

While the averments of the bill, supported by the injunction affidavit, were quite sufficient to warrant the awarding of the preliminary injunction, there is nothing in the answers to justify the decree dissolving it.

In substance, the main averment is that the School Directors of Hamburg School district have contracted for the erection of a schoolhouse, etc., at a cost of more than $20,000, which will increase the indebtedness of said district nearly four per centum of the aggregate assessed valuation of the taxable property in the district, contrary to the provisions of section 8, article ix of the constitution, wíúch ordains, inter alia, that no school district shall “incur any new debt or increase its indebtedness to an amount exceeding two per centum upon such assessed valuation of property, without the assent of the electors thereof,.at a public election, in such manner as may be provided by law.”

The appellees, in their answers, virtually admit all the material averments of the bill, as to the aggregate amount of the assessed valuation of the taxable property in the district, cost of erecting schoolhouse, etc., contracted for, but they deny that their action in the premises will have the effect of increasing the indebtedness of the district beyond the constitutional limit, because they say the school district wras authorized by decree of court, August 18, 1888, “ to borrow the sum of $25,000.00, for the purpose of erecting a schoolhouse, a portion of which it is proposed to expend and appropriate to the purposes set forth in paragraph 4 of the plaintiff’s bill, that being the purpose for wdfich the said loan was authorized.” The object of this averment, by way of confession and avoidance, is to show that the school district has in its possession and control, and subject to its disposal for building purposes, sufficient funds to meet the contract obligations for the erection of the schoolhouse, etc. But it is conceded by the learned judge of the court below that the order authorizing the alleged loan was contrary to law and void. In his opinion he says; “Although the loan was made contrary to the provisions of said section 8, it does not follow that the holders of the securities are prejudiced or that the school district may not lawfully expend, in a lawful way, the proceeds of the loan thus obtained.” In that conclusion he is clearly mistaken. The loan being admittedly illegal, there is nothing to prevent the holders of such bonds or certificates of indebtedness, as have been issued, from demanding their money, and, in equity and good conscience, it ought to be returned. Restitution of money thus illegally obtained, is always in order.

Assuming, therefore, for the sake of argument, that the unauthorized loan of $25,000 has been placed, and the money actually in the treasury of the school district, it cannot be regarded as a fund properly and certainly applicable to the cost of erecting the proposed new scnool building under the contract complained of. But, it is not distinctly averred, in the answer, or in any manner shown, that said loan, or any considerable portion thereof, has been actually placed. If such was the fact, it should have been unequivocally averred. It cannot be inferred from an evasively worded answer, such as we have in this case. Nor, can it be assumed that the securities, representing the proposed loan, are susceptible of negotiation. It is in the highest degree improbable that capitalists can be found who are willing to advance money on bonds or certificates of indebtedness issued in violation of law. Such bonds are worthless. Millerstown Borough v. Frederick, 114 Pa. 435; Pike County v. Rowland, 94 Pa. 238; Ackerman v. Buchman, 109 Pa. 254; Wilkes Barre’s Appeal, Id. 554.

In any view that can be properly taken of the case, the contention of appellees that they are provided with funds necessary to defray the cost of the new school building, etc., is very far from being sustained by any competent proof.

It is also contended that appellant is estopped because he “ had knowledge that the contract was being entered into,” and did not protest.

The averment that he had such knowledge is new matter in confession and avoidance, and therefore not responsive to the bill. In motions to dissolve preliminary injunctions, the well settled rule is, that the answer cannot be considered except in so far as it is responsive to the allegations of the bill on which the writ issued; High on Injunctions, §§ 883, 895.

But, aside from that, the averment is merely of appellees’ belief “from information received.” Such an averment is not evidence, even if responsive. It is pleading merely, and puts in issue the fact in dispute.

There was no lack of vigilance on the part of appellant in asserting his right as a taxpayer of the district. He had a right to assume that the appellees, in the discharge of their duties as school directors, ■would proceed according to law. When he ascertained they were not doing so, he promptly availed himself of his right to restrain their illegal action.

There appears to be nothing in the record to justify the court below in dissolving the preliminary injunction.

It is adjudged and decreed that the order of court dissolving the preliminary injunction be reversed and set aside, and it is hereby ordered that said injunction be reinstated and continued in full force until final hearing, and that the appellees individually pay the costs.