Court Opinion

ID: 8013391
Source: CourtListenerOpinion
Date Created: 2022-09-09 02:01:02.233145+00
Date Added: 2024-06-11T16:36:11.435914
License: Public Domain

MARSHALL, J.
{Dissenting). — This is a suit to recover damages for an alleged breach of contract made by plaintiff with defendant’ for building one section of the O. K. Greek sewer. Before the completion of the contract the work was stopped by the city authorities as found by the trial court. Plaintiff recovered judgment below for the retained percentage for work done in the execution of the contract. The defense is that the contract is ultra vires and void, because it was not entered into in the manner provided by the charter of the city. The charter provisions invoked are sections 2 of article Ill, 30 of article IV, and 44 of article XVII, which are respectively as follows:
“Sec. 2 (art. Ill). No appropriation or payment shall be made from any revenue or fund account in excess of the amount actually collected and in the treasury. Within the first month of each fiscal year the mayor and common council shall by ordinance, as far as practicable, make all necessary apportionments of the revenue to be raised for such year to the expenses of the several departments, and for all public works, under proper headings, and for such other objects as it may be necessary to provide for. All ordinances that contemplate the payment of any money shall, upon their second reading, be referred to the appropriate committee of the house in which such ordinances are introduced, who shall obtain the indorsement thereon of the comptroller, to the effect that sufficient unappropriated means stand to the credit of the fund or revenue account therein mentioned to meet the requirements of such ordinances, and that the same is in the treasury, or it shall not be lawful to pass the said ordinances.
“Sec. 30 (art. IV). The common council shall not appropriate money for any purpose whatever in excess of the revenue of the fiscal year actually collected and in the treasury at the time of such appropriation and unappropriated. Neither the common council nor any officer of the city, except the comptroller, in a single instance in this charter provided, shall *148have authority to make any contract, or do any act binding Kansas City, or imposing upon said city any liability to pay money until a definite amount of money shall first have been appropriated for the liquidation of all pecuniary liability of said city under said contract, or in consequence of said act; and the amount of said appropriation shall be the maximum limit of the liability of the city under any such contract or in consequence of any such act and said contract or act shall be db initio null and void as to the’city for any other or further liability. Any member of the common council who shall knowingly vote for any appropriation of money or the making of any contract in violation of this charter, or any officer of the city who shall knowingly do any act to impose upon the ciy any pecuniary liability in excess of the authority in this charter limited, shall be guilty of a misdemeanor, and, upon conviction, be punished by a fine of not less than one hundred nor more than one thousand dollars, or imprisonment in the county jail not less than one month nor more than one year, or by both such fine and imprisonment. If any financial officer of the city shall buy or sell, for the purpose of speculation, any indebtedness of the city, or deal therein during his term of office, he shall be guilty of a misdemeanor, and be punished upon conviction by a fine of not less than one hundred dollars nor more than one thousand dollars, or imprisonment in the county jail not less than one month nor more than one year, or by both such fine and imprisonment.
“Sec. 44 (art. XVII). Bonds — Issuing of for City Hall and Public Sewers — Blections.—The common council may, by ordinance, within the limitations and in conformity to the Constitution of the State, submit to the qualified voters of the city at any special or general election, a proposition to issue, by the city, bonds to an amount not exceeding five hundred thousand dollars: Provided, that such bonds shall not be sold for less than their par value, and shall not bear more than five per cent interest per annum; and provided further, that three-fifths of the proceeds arising from the sale of such bonds shall *149be applied to the construction of a city hall within the city, and two-fifths thereof shall be applied to the construction of public sewer or sewers in the city: and provided further, that the common council shall, in the ordinance submitting such proposition to issue bonds, expressly designate the location of the city hall, and the location as near as practicable of the public sewer or sewers, to the construction of which the proceeds of said bonds shall be applied.”
Pursuant to the provisions of section 44 of article XYII, the common council of Kansas City passed an ordinance submitting to the qualified voters of that city a proposition to issue five hundred thousand dollars of bonds, three-fifths of the proceeds of which to be used for building a new city hall and two-fifths to “be applied to the construction of a public sewer in said city along or near O. K. Creek in said city . . .”
The proposition found favor with the voters, and after the bonds had been sold and the proceeds were in the city treasury to the credit of the City Hall fund and the O. K. sewer fund, respectively, the common council passed an ordinance authorizing and instructing “the Board of Public Works to proceed to let a contract for the construction of the same” (the sewer). The board let the work inr four sections at an estimated cost, as follows:
Section 1, ■ J. T. Kelly,................. $27,525.47
Section 2, Buckner, Douglass &. Go....... 62,690.17
Section 3, Michael Walsh................ 55,841.79
Section 4, James Pryor................. 52,915.00
$198,972.43
Prior to plaintiff’s work on section 4 being stopped, he had done work of the value of $25,695, of which he had been paid $21,840.75, and the retained percentage of fifteen per cent, amounting to $4,302.03, is the amount of his recovery in the circuit court.
Upon the non-completion of section 4 covered by plaintiff’s contract, the city re-let the work on that section to *150Charles Sechested for $30,042.70, and paid him that sum. It also paid out of the proceeds of the gale of the bonds, “miscellaneous expenses,” aggregating $5,206.32. The bonds sold for $203,147.20, which was expended by the city as follows:
Suction 1, J T. Kelly....................$27,525.47
Section 2, Buckner, Douglass & Co....... 62,690.17
Section 3, Michael Walsh.............. 55,841.79
Section 4, James Pryor................. 21,840.75
Section 4, Chas. Sechested.............. 30,042.70
Miscellaneous................:......... 5,206.32
Total..............■.............$203,147.20
In addition to this the city has paid out of general revenue, on account of this sewer, the following sums:
Michael Walsh.......................... $7,555.11
Charles Sechested........................ 5,294.08
Total........................ $12,849.19
And if it is liable to plaintiff in this action it will have to pay him $4,302.03 out of general revenue. With the result that in addition to the total proceeds of the sale of the bonds amounting to $203,147.29, there has been already paid $12,849.19 out of general revenue, and to this will be added the $4,302.03 to plaintiff, if he is allowed to recover, which will swell the aggregate cost of the sewer to $220,298.85.
It is an inflexible rule of law that parties dealing with a municipal corporation or with its agents or officers must, at their peril, take notice of the limits of the powers both of the municipal corporation, and of those assuming to act in its behalf. “The requirements of the charter .... is the only touchstone of corporate liability.” [Keating v. Kansas City, 84 Mo. l. c. 419; Cheeney v. Brookfield, 60 Mo. 53; Mister v. Kansas City, 18 Mo. App. 217; State ex rel. v. Kirkley, 29 Md. 85; Gould v. Sterling, 23 N. Y. 456; Clark v. Des Moines, 19 Iowa. 199; Veeder v. Lima, 19 Wis. 280; Bryan v. Page, 51 Tex. 532; Tainter v. Worcester, 123 Mass. 311; Barton v. Swepston, 44 Ark. 437; Thomas v. Richmond, 12 *151Wall. 349; East Oakland v. Skinner, 94 U. S. 255; Cooley’s Const. Lim. (6 Ed.), p. 233; 1 Dillon on Mun. Corp. (4 Ed.), sec. 457.] The last named author has well said: “The history of the workings of municipal bodies has demonstrated the salutary nature of this principle, and that it is the part of true wisdom to keep the corporate wings clipped down to the lawful standard.”
Provisions, like section 30 of article IV of the Kansas City charter, prohibiting the passage of any ordinance authorizing any contract until the comptroller has certified that sufficient unappropriated means stand to the credit of the fund or revenue account therein mentioned to meet the requirement of such ordinances, and “until a definite amount of money shall first have been appropriated for the liquidation of all pecuniary liability of said city under said contract” are to be found in the charter of St. Louis (sec. 28, art. VI, and sec 12 of art. V ) and in the statutes of this State relating to cities of the first class (secs. 1100 and 1150, R. S. 1889); and to cities of the second class (secs. 1302 and 1303, R. S. 1889). Similar provisions are contained in charters of many other cities in other states (Philadelphia v. Flanigen, 47 Pa. St. 21; Philadelphia v. Johnson, 47 Pa. St. 382; Bladen v. Philadelphia, 60 Pa. St. 464; Smith Canal or Ditch Co. v. Denver, 20 Colo. 84). Dillon on Mun. Corp. (4 Ed.), section 130, speaking of the reason underlying these provisions says: “Such limitations have been found by experience to be necessary to prevent extravagance, are remedial in their nature, are based upon the wise policy of paying as you go, and ought, therefore, to be construed and applied to secure the end sought.”
It is a matter of history, not only in our own State, but in most of the States, that before the adoption of these safeguards the credit of our cities was greatly impaired by outstanding liabilities created by reckless disregard of ability to discharge obligations extravagantly or injudiciously incurred. These provisions of city charters are in harmony with the policy of the State and the limitations upon the power of *152cities to bind themselves as expressed in section 12 of article X of tbe Constitution. They were all intended to put the State, the counties and the cities upon a cash basis, as was pointed out by this court in State ex rel. v. Payne, 151 Mo. 663, and to prevent the creation of any liability beyond the power and present financial means of the city to pay the same, promptly, at maturity. They have had the desired effect, as the improved financial status of our municipalities fully attests.
In making the contract involved in this case the provisions of section 2 of article III and of section 30 of article IV of the charter of Kansas City were ignored entirely. There was not even a pretense of complying with them.
The only excuse offered for not doing so is that section 44 of article XVII and the ordinance under which the proposition to issue the five hundred thousand dollars of bonds was itself an appropriation by the people themselves of two-thirds of the proceeds thereof to the building of the O. K. sewer, and hence it was not necessary to observe these safeguards, and furthermore that these charter safeguards only apply to contracts which are to be paid for out of general revenue, that is, out of money raised by taxation. It is conceded that the municipality has no power to bind itself except in the manner and by the mode prescribed in its organic law, but it is contended that section 44 of article XVII must be construed alone and that sections 2 of article III and 30 of article IV, have no application to this contract, and that there is a distinction between this contract and ordinary contracts because the money to pay for this sewer was gotten into the treasury by the vote of the people, and can only be applied to the construction of this sewer, or in other words that the money was appropriated by the people to pay for the building of this sewer, •and hence no appropriation by the common council to meet the obligations of this contract was necessary.
No authority or precedent is cited by counsel or the ma*153jority opinion to support the proposition, nor have I been able to find any in the books. It is simply asserted, and, in.my judgment, is not supported by reason or logic.
It is an universal rule of construction of all constitutions, statutes, charters or contracts that all of the parts relating to the same subject-matter must be construed together, and that construction adopted, if possible, which will give effect to and harmonize all of its parts. [State ex rel. v. Marion Co. Court, 128 Mo. 427; Reddick v. Walsh, 15 Mo. 519; St. Louis v. Lane, 110 Mo. 254; Ex parte Joffee, 46 Mo. App. 360.] It follows, therefore, that sections 2 of article III, 30 of article IV, and 44 of article XVII, should be construed so as to give effect to them all, if possible, and it is not pretended that they can not all stand together and all be followed to their strictest letter. Section 44 provides how money may be raised and to what general purposes it shall be applied, and requires the ordinance which submits the proposition to raise the money to prescribe the location of the city hall and of the sewers to be constructed, and the ordinance in this case did so, with the result that $300,000 was raised to build a city ball at a specified place and $200,000 to build a sewer “along or near O. K. creek.” This money was to be applied to these purposes alone and could not be used for any other purposes. But whilst this is true no money has ever been specifically appropriated to meet the obligations incurred by the contracts let to the several contractors for building that sewer. It is one thing to raise money for a general purpose and impress a trust upon it for that purpose, and quite a different thing to appropriate a specific sum of money out of a general fund to meet a specific contract. All money raised by taxation is for a public purpose and is a trust fund in the hands of the public officers for that purpose, but no money in any public custody can be applied to pay any contract until it has been specifically appropriated by the legislative branch of the government, the ■holders of the strings to the public treasury, for that specific *154contract. This is as true of the State’s revenues as it is of a municipality’s. Section 43 of article IV of our Constitution provides: “All revenue collected and moneys received by the State from any source whatsoever shall go into the treasury, and the General Assembly shall have no power to divert the same, or to permit money to be drawn from the treasury, except in pursuance of regular appropriations made by law,” etc. This is absolute, mandatory and without exception or qualification, and admits of no construction no matter from what source the money got into the treasury.
In like manner and to the same end section 2 of article III of the charter of Kansas City, requires the common council within the first month of each year by ordinance, as far as possible, to “make all necessary apportionments of the revenue to be raised for such year to the expenses of the several departments, and for all public ivories, under proper headings, and for such other objects as it may be necessary to provide for.” When the revenues are thus apportioned they can not be used for any other purpose than that specified in the ordinance. They are held in trust for the purposes specified. But they are held in bulk for a specific purpose, and are not appropriated to meet any specific contract or liability. When it is desired to apply or appropriate any portion of the total sum so held in trust to the payment of a liability under a particular contract, section 30 of article TV becomes immediately applicable, and requires a particular amount to be appropriated out of the general fund so previously set apart, and also requires a certificate of the fiscal officer of the city, the comptroller, that sufficient unappropriated means stand to the credit of the fund or revenue account to meet the requirements of the ordinance. It will be observed that this certificate is as much required where the means stand to the credit of any fund, as where they stand to the credit of a revenue account. The reason and purpose of this safeguard is that the legislative department is not supposed to know whether the sum of'all *155specific appropriations equals or exceeds the sunjof the general fund or revenue account; whilst the comptroller, who is specially charged with the duty of preserving the city’s credit and with not allowing any fund to be overdrawn, keeps regular books and knows whether the specific appropriation covered by the ordinance authorizing the contract can be met by the amount belonging to the fund or revenue to be drawn on and remaining unappropriated therein. In short, it is a safeguard against unwise or improper incurring of liability, to the end that the city shall not be cast into debt beyond its ability xo pay.
No reason has been given or can be given why all these safeguards and precautions against running into debt, which have been provided by the framers of the Constitution and of the city charters, should apply to money gotten into the public treasury by taxation, and should not apply to money gotten into the treasury by the sale of bonds. The State Constitution expressly prohibits money gotten into the treasury by taxation, that is revenue, and “from any source whatever” to be drawn out except in pursuance of regular appropriations. And section 2 of article III of the Kansas City charter requires the comptroller’s certificate that sufficient unappropriated means stand to the credit of the fund or revenue account therein mentioned to meet the requirements of such ordinances. The effect upon tbe city’s credit and the embarrassing condition which these provisions were intended to prevent is the same whether the liability arises out of contracts to be paid for out of general revenue or out of the sale of bonds. In either event the ultimate fact is that the city has contracted beyond its ability to pay, and will be in debt, and will not have been run on a cash basis, and all because these safeguards were violated.
The distinction attempted to be made in this case between general revenue and the proceeds of the sale of these bonds is wholly untenable. It is easy enough to say that the organic *156safeguards prescribed by sections 2 of article III and 30 of article IY, shall apply to contracts to be paid for out of general revenue, and shall not apply to contracts to be paid for out of the proceeds of these bonds, but it is impossible to give any reason for so saying. No reason has been given by counsel. None has been given in the majority opinion. None can be given. None exists. Such a construction is opposed to the letter and spirit of the Constitution of the State and of the charter 'of Kansas City. It is without the pride of precedent and it is to be hoped it will produce no progeny. Its practical effect has already been to take over twelve thousand dollars out of general revenue to make good the deficit in the fund provided to build this sewer, and if this judgment stands the sewer will have cost $11,151.22 more than the people provided means to pay for it.
To my mind it is too clear for debate that when the people adopted the proposition to issue and sell $500,000 of bonds and apply two-fifths of the proceeds thereof to building this sewer, they never thought that money would be expended- by the city officers without regard to the safeguards of the charter; they never thought they were opening the door to their agents running them into debt and requiring the deficit to be taken out of general revenue; they thought that the sum thus provided, if spent as the charter prescribed, would be sufficient to accomplish the purpose intended; they believed they were providing a fund for a purpose and not making an appropriation to meet the liability to be incurred under one or more contracts; they left it to the common council to make specific appropriations within the limits of the fund provided; they made no contracts neither did they make any appropriation; they raised the money and impressed it with a trust, set it apart for a specific purpose, just as the common council does the general revenue at the beginning of each fiscal year, but they left it to their officers and public agents to contract, to- appropriate and spend the trust fund within the other requirements *157of the charter. It was not so done, and the usual result of disregarding the law hits followed.
The fact that when plaintiffs contract was made there remained unexpended in the city" treasury of this trust fund, the sum of $108,833.24 and when he got his final estimate the sum of $68,058.17, does not affect, impair or militate against the principle involved in this case, nor does it change the fact that the sum expended for all the contracts entered into exceeded the whole amount standing to the credit of this sewer fund. No portion of that unexpended balance was specially appropriated or set apart to pay this specific contract, or any other specific contract, for if it had been it could not have been used for any other contract, and if that had been done in every case the total sum contracted to be paid could not have exceeded the fund on hand to pay the total liability incurred, and there would have been no debt left unpaid; to prevent which, was the purpose and letter and spirit of the charter, and with which plaintiff and all other contractors are charged with as much knowledge as the city officers.
Eor these reasons I dissent from the opinion in this case.
Sherwood and Burgess, JJ., concur herein.