Case Name: The Niles Water Works v. The Mayor, Recorder and Aldermen of the City of Niles
Court: Michigan Supreme Court
Jurisdiction: Michigan
Decision Date: 1886-01-27
Citations: 59 Mich. 311
Docket Number: 
Parties: The Niles Water Works v. The Mayor, Recorder and Aldermen of the City of Niles.
Judges: Ciiamplin and Morse, JJ., concurred.
Reporter: Michigan Reports
Volume: 59
Pages: 311–326

Head Matter:
The Niles Water Works v. The Mayor, Recorder and Aldermen of the City of Niles.
City charter — Power of common council to contract debts or incur liabilities —Contract construed, and held to fall within the prohibitions of charter, and therefore void — Being void, no recovery ■ can be had for what has been furnished the city under it.
1. Where a city charter prohibits the common, council from contracting debts or incurring liabilities exceeding in any one year the revenue for such year, unless authorized by a majority vote of the electors of the city, a contract made by the common council, without such vote, for the use of at least fifty water hydrants, per year, at fifty dollars each, for a term of thirty years, creates a liability against the city to the full extent of the thirty years’ rental, which aggregate liability being in excess of the revenue authorized to be raised in any one year, the contract falls within the language, as well as within the mischief of the prohibition, and is void.
2. A city council is only an agency to represent the people of the municipality, and the Legislature having given them what is deemed ample power to raise money, year by year, for the needs of each year, and no more, if they desire to make larger outlays, or to burden the future revenues of the city, it is left to the parties more directly interested to determine how far this shall be done.
3. The contract being void, there can be no recovery for what has been furnished under it.
Error to Berrien. (Smith, J.)
Argued October 8, 1885.
Decided January 27, 1886.
Assumpsit. Plaintiff brings error.
Affirmed.
The facts are stated in the opinions.
O. W. Ooolidge, Spafford Tryon and Cheever da Underwood., for'appellant :
An obligation under a contract to pay for work when performed, does not constitute an indebtedness, within the meaning of the constitution : Dively v. City of Cedar Falls, 27 Ia. 227; and a sum payable upon a contingency is not a debt, and does not become such until the contingency has happened: People v. Arguello, 37 Cal. 524; and when it is uncertain whether anything will ever be demandable under the contract, there can be no debt: Wentworth v. Whittemore, 1 Mass. 471-3; Weston v. Syracuse, 17 N. Y. 110, 458. This general principle has been applied to just such contracts as the one before us: N. Y. Mut. G. L. Co. v. City of New York, 49 N. Y. 227; Davenport G. L. etc. Co. v. Davenport, 13 Ia. 229, 234; Grant v. City of Davenport, 36 Ia. 396; French v. City of Burlington, 42 Ia. 614; Burlington Water Co. v. Woodward, 49 Ia. 58; E. St. Louis v. E. St. Louis G. Co. 98 Ill. 430; Prince v. Quincy, 105 Ill. 138 ; Quincy v. Bull, 106 Ill. 337; Valparaiso v. Gardner, 97 Ind. 1. [Counsel discuss the question of the power of the common council to contract for water, independently of the statute, asserting such power and citing authorities. Reporter.]
Granting that the contract is ultra vires, so far as it has been executed, it will be enforced. In the case of Gale v. Village of Kalamazoo, 23 Mich. 353, this proposition is recognized; also in E. St. Louis v. E. St. Louis G. etc. Co. 98 Ill. 415; Parish v. Wheeler, 22 N. Y. 494, 508 ; Day v. Spiral Spring Buggy Co. 57 Mich. 146; Bissell v. M. S. & N. I. R. R. Co. 22 N. Y. 262, 279.
Plaintiff was entitled to have the case submitted to the jury upon the common counts, the contract price being the measure of damages: Begole v. McKenzie, 26 Mich. 470; McGraw v. Sturgeon, 29 Mich. 426; Moon v. Harder, 38. Mich. 566.
Theo. G. Bearer and Ed/ward Bacon, for defendant:
The contract entered into [see dissenting opinion of Sherwood, J.] was prohibited by section 32 of the charter of the city of Niles. In it the city did incur a liability exceeding its revenue for 1878, the year the contract was made: Nougues v. Douglass, 7 Cal. 79 ; San Francisco Gas Co. v. Brickwedel, 62 Cal. 641; Smith v. City of Newburgh, 77 N. Y. 134. The limitation in charter “ to defray the expenses thereof ” cannot extend to any such liabilities as those which the contract purports to incur for the city, namely, to pay a yearly rental of fifty dollars a hydrant, for thirty years : Quincy v. Jackson, 113 U. S. 337; Upton v. Kennedy, 36 Mich. 220; Newell v. People, 7 N. Y. 9, 87; Davis v. Town of Harrison, 46 N. J. Law, 79 ; Litchfield v. Ballou, 114 U. S. 190.
Every form of liability under the written contract was in excess of the power “to contract debts and incur liabilities,” and was plainly prohibited by section 32 of charter : Springfield v. Edwards, 84 Ill. 632; Jonas v. Cincinnati, 18 Ohio, 318; Wallace v. San Jose, 29 Cal. 180; Bladen v. Philadelphia, 60 Penn. St. 464; Newell v. People, 7 N. Y. 9, 87. The alleged liability and indebtedness under the contract were prohibited by law, hence plaintiff cannot recover under any implied contract for the same liability or indebtedness, or any part thereof: Detroit v. Michigan Paving Co. 36 Mich. 338; Thomas v. Richmond, 12 Wall. 349; John v. Larson, 28 Wis. 604; Smith v. Bean, 15 N. H. 577; McDonald v. The Mayor etc. of N. Y. 68 N. Y. 23; Hitchcock v. Galveston, 96 U. S. 351; Mosher v. School District, 44 Ia. 122; Council Bluffs v. Stewart, 51 Ia. 385; Litchfield v. Ballou, 114 U. S. 193.
“The powers of corporations, organized under legislative statntes, are such, and such only, as these statutes confer : ” Thomas v. R. R. Co. 101 U. S. 82; and “if any doubt exists as to the right claimed by a corporation, it should be solved in favor of the public:” Detroit v. Mutual Gas L. Co. 43 Mich. 607.
“ Section 1. The People of the State of Michigan enact, That whenever the common council of any city or incorporated village, or the municipal authority of any town in this State, shall, by resolution, declare that it is expedient to have constructed works for the purpose of supplying such city, village, or town, and the inhabitants thereof, with water, but that it is inexpedient for such city, town, or village, under the power granted in its charter, to build such works, it shall be lawful for any number of persons, not less than five, to organize a company for the construction of such water-works, or for any company previously organized to construct such water-works under the provisions of this act; and such corporation shall have all the powers and privileges prescribed in the act in regard to corporations,being chapter fifty-five of Revised Statutes of 1846, and chapter seventy-three of the Compiled Laws. They shall be capable of suing and being sued in any court of this State; may have a common seal, and'alter and amend the same at pleasure; may elect, in such a manner as they may determine, all necessary officers; may fix their compensation and determine their duties; and make from time to time such by-laws, not inconsistent with the constitution and laws of this State, as a majority of the stockholders shall choose.”

Opinion:
Campbell, C. J.
This action was brought to recover for the price of furnishing hydrants and water to the city of Niles. All of the bills presented were under a written contract, and for the contract price. The defense allowed at the circuit was the illegality of the contract.
This contract was one made in 1878 with Solon L. Wiley, plaintiff's assignor, whereby he was to have exclusive privileges .of supplying water from Barron lake for thirty years, -and of laying mains and pipes for that purpose. The city agreed to use at least fifty hydrants a year, at the price of fifty dollars a year, making an annual expenditure of $2,500.
The charter of Niles contains a provision that the common council shall have no power " to contract debts, incur liabilities, or make expenditures in any one year which shall exceed the revenue for the same year, unless first authorized to do so by a majority vote of the tax-payers of said city, at a public meeting thereof called and conducted as hereinafter provided." Local Acts 1877, p. 505.
We have found nothing in any statute to vary this, and the amendment of 1877 is in some respects moré explicit than the section as before existing.
It is not claimed that any authority was ever given to make this contract by vote of the tax-payers. The annual rental of $2,500 did not exceed, with other expenses, the authorized annual levy for past years. The aggregate sum of $75,000 would exceed any such percentage as is allowed in any one year. *
We have had occasion heretofore to consider the general policy of our city charters in confining obligations to the annual appropriations, where not otherwise authorized. It is not necessary in the present case to determine whether, if the aggregate rental for thirty years should be brought within one year's revenue, it could be maintained as authorized. It has been held by several courts, whether correctly we shall not inquire, that nothing is an actual debt which depends on future accruing, and that under such a contract as this each year's rental did not become a debt until the year came round. However this may be, there can be no doubt in our opinion that this whole contract obligation isa "liability" to the full extent of the thirty-years rental; and it is equally clear that all unpaid sums would be aggregated until paid. It seems to us to come within the language, as well as within the mischief, of the prohibition. The city council is only an agency to represent the people of the municipality, and the Legislature has seen fit to give them what is deemed ample power to raise money year by year for the needs of each year, and no more. When they desire to make larger outlays, or to burden the future revenues of the city, it is left to the parties who are more directly interested to determine how far this shall be done.
There is no occasion to construe terms beyond their natural meaning; and as this clause was intended for beneficial purposes, and to carry out the constitutional mandate to restrict the powers of cities and villages in taxation, borrowing money, and contracting debts (Const, art. 15, § 13), it should be given its full effect.
If this contract is void, there can be no recovery for what has been furnished under it. There would be little safety in any such restriction, if it could be evaded by claims, year after year, of the very same thing which was prohibited to be contracted for. As this question has been settled by our own decisions, we need not inquire elsewhere: Detroit v. Michigan Paving Co. 36 Mich. 335; Detroit v. Robinson, 38 Mich. 108.
The judgment below should be affirmed.
Ciiamplin and Morse, JJ., concurred.