Court Opinion

ID: 6990501
Source: CourtListenerOpinion
Date Created: 2022-07-24 03:24:08.414839+00
Date Added: 2024-06-11T16:09:35.804497
License: Public Domain

Pillsbuby, J. Two principal points are made against the right of the plaintiff in error to maintain this action for the use of Griswold: First, that as the contract was entered into before the tax was actually levied, it was void as creating an indebtedness against the city when it was already indebted beyond the constitutional limit of five per cent, upon the assessment of the previous year; and second, that the bond in suit is not for the benefit of individuals but to secure the city, and as the city had discharged itself from all liability by issuing the warrants upon, this special fund it has not been damnified, and therefore no breach of the bond has accrued upon which any one can hold the sureties. The constitutional provision relied upon is the 12th section of Art. 9, and is this: “ Ro county, city, township, school district, or other municipal corporation, shall be allowed to become indebted in any manner or for any purpose, to an amount, including existing indebtedness, in the aggregate exceeding five per centum on the value of the taxable property therein, to be ascertained by the last assessment for State and county taxes, previous to the incurring of such indebtedness.” This provision has frequently been construed by the Supreme Court and its effect upon “temporary loans,” “ certificates of indebtedness ” and “ contracts creating liabilities in the future,” passed upon and determined, and it will only be necessary for ns to ascertain the law thus declared and apply it to the facts of this case as shown by the averments of the declaration. In the City of Springfield v. Edwards, 84 Ill. 626, a bill was filed by a taxpayer to enjoin the city from incurring indebtedness and levying and collecting taxes in violation of the charter and of the constitution. It appeared in that case that the city, although indebted beyond the constitutional limit, had been borrowing money to pay current expenses, and had issued warrants made payable at a future day with interest, and had also issued bonds for some of the loans thus made. It was contended in that case by the city that when liabilities are created -and appropriations are made which are within the limits of the revenue accruing to meet them, they are not debts within the meaning of the prohibition of the constitution, and that temporary loans are not, when within the limit of the revenue expected to be realized. Authorities were referred to from other States bearing upon this contention and the rule deduced from them by our court is thus stated: “ These cases maintain the doctrine that the revenues may be appropriated in anticipation of their receipt, as effectually as when actually in the treasury; that the appropriation of moneys, when received, meets the services as they are rendered, thus discharging the liabilities as they arise, or rather anticipating and preventing their existence.” The court, then, after commenting upon the language of the provision of the Constitution above quoted, and considering what kinds of indebtedness are within its terms, announces its conclusion as to the rule that should obtain in this State as follows: “ In this view, we are only prepared to yield our assent to the rule recognized by the authorities referred to, with these qualifications: First, the tax appropriated must, at the time, be actually levied; second, by the legal effect of the contract between the corporation and the individual, made at the time of the appropriation, the appropriation and issuing and accepting of a warrant or order on the treasury for its payment, must operate to prevent any liability to accrue on the contract against the corporation. “ The principle, as we understand, is, that there is in such case no debt, because one thing is simply given and accepted in exchange for another. When the appropriation is male and the warrant or order on the treasury for its payment is issued and accepted, the transaction is closed on the part of the corporation, leaving no future obligation, either absolute or contingent upon it, whereby its debt may be increased. “ But until a tax is levied, there is nothing in existence which can be exchanged, and an obligation to levy a tax in the future, for the benefit of a particular individual, necessarily implies the existence of a present debt in favor of the individual against the corporation, which he is lawfully entitled to have paid by the levy. If the making of the appropriation and issuing and accepting a warrant for its payment does not have the effect of relieving the corporation of all liability, or, in other words, if it incurs any liability thereby, it must manifestly incur, either absolutely or contingently, a debt. “ Where a warrant or order, payable from a specific appropriation of a tax levied but not yet collected, is accepted in exchange for services rendered or to be rendered, or for materials furnished, so that there is, in fact, but the exchange of one thing for another, the duty'remains for the proper officers to collect and pay over the tax in accordance with the appropriation; but obviously, for any failure in that regard, the remedy must be against the officers and not against the corporation, for otherwise a contingent debt would, in this way, be incurred by the corporation.” Again, in Law v. The People, 87 Ill. 385, the question came before the Supreme Court, arising, however, upon the right of the City of Chicago to issue certificates of indebtedness to be paid out of the tax levy of the year for current expenses, and it was held that such certificates were void, as creating an additional indebtedness to be paid in the future, and that the case was within the principle of the Edwards case and governed by it. For the purpose of showing how the court construed the Edwards case we quote from the opinion in the Law case. “ In the case of The City of Springfield v. Edwards, 84 Ill. 626, we pointed out the manner in which revenue already levied and to be collected might be anticipated without the city becoming indebted, or violating the constitutional or statutory prohibition, and the questions presented by this record are essentially the same as in that, and must be governed by that case. In that case it was held that the tax upon which the warrant is drawn must, at the time, be actually levied, and the delivery of the warrant on the treasury must have the legal effect and operate as a contract between the corporation and the person receiving the warrant, that the city shall thereby incur no liability whatever. In such a case there is no debt incurred, because the warrant on the Treasurer is received for the work done or the articles furnished.” The doctrine of these cases was re-affirmed in Fuller v. The City of Chicago, 89 Ill. 282. Howell v. City of Peoria, 90 Ill. 104, was a case where the city had contracted with Dean Brothers to build and set up in the city certain water works pumps for the sum of $11,000, one fourth to be paid down and the baHnce in equal payments of $2,750, payable at different times in the future, with eight per cent, interest, and to secure the deferred payments the city was to give its three promissory notes. At the suit of a taxpayer the court held the contract invalid as increasing the indebtedness of the city, it being already indebted beyond the constitutional limit. In the case of this same plaintiff in error against the East St. Louis Gas Light and Coke Company, 98 Ill. 415, the action was brought by the gas company to recover certain monthly installments due it for gas furnished for lighting the streets of the city. It appeared in that case that in 1874 the city entered into a contract with the gas company to erect lamp posts and extend its street main pipes so as to accommodate the city and to furnish gas at a certain price per lamp per year, to be paid in monthly installments. The contract was to continue for thirty years from October 1, 1874. It was insisted by the city, in that case, as one objection to the contract, that by it an indebtedness of §211,200 was created against the city, it requiring that sum to pay for the gas furnished under it for the thirty years it was to run. The previous indebtedness of the city was only §20,000 less than the limit allowed by the Constitution. In answer to this contention the court says: “The contract was for the furnishing of an article for nightly consumption by the city during a period of thirty years, fixing the price at which the article should be furnished. There was no indebtedness in advance of anything being furnished, but indebtedness arose as gas should have been furnished along from night to night during the period of thirty years. The contract provides for the payment monthly, at the end of each month, the amount that became due for the month then ended. When the company has furnished the gas for a certain month, then there is a liability—an indebtedness arises—and not before, as we conceive. Hence the amounts that might become due and payable under the contract in future years, did not constitute a debt against the city at the time of the entering into the contract, within the meaning of the Constitution.” The distinction between this and the Howell case is very manifest. Here no liability is incurred until the article is fmnislied from time to time, the consideration being received daily during the entire term of the contract; consequently the aggregate amount that might have to be paid under the contract, if complied with, is not to be taken as creating the indebtedness at the inception of the contract, while in Howell’s case the entire consideration was to be received at once, and to be paid for in the future, thus clearly adding to the indebtedness of the city. From these decisions we deem the following propositions to he fully established: First. That a municipal corporation can not become indebted in any manner or for any .purpose beyond the consti- ' tutional limit. Second. Ho contract, certificate of indebtedness, nor temporary loan, can be valid if it has the effect of increasing the present municipal indebtedness beyond such limit. Third. Municipalities may, for the purpose of paying their ourrent expenses, anticipate the collection of the revenue appropriated to the payment of such expenses by observing the following requirements: 1st. The tax appropriated must at the time be actually levied. 2d. The warrant drawn upon the treasury in payment of services rendered or articles furnished, must be drawn payable out of this particular fund, and must operate-as a contract, and have the legal effect, between the corporation and the person receiving the warrant, that the corporation shall incur no liability whatever. Applying these principles to the case in hand the question made is not difficult of solution. The City of East St. Louis was, at the time of entering into the contract, indebted beyond the constitutional limit, and has ever since remained so, as alleged in the declaration and admitted by the demurrer. As the tax contemplated to be levied for lighting the streets had not been levied at the time of making the contract, the contract on the part of the city can have no greater force than an agreement thereafter to levy such tax for the benefit of the other contracting party, which can not be done by the city under the authorities of Springfield v. Edwards; and Law v. The People, supra. The tax not being levied, there was nothing to give in exchange for the gas furnished, and manifestly, if it agreed to pay monthly for the gas furnished for the preceding month, a debt was created against the city within the inhibition of the Constitution. As was said in East St. Louis v. E. St. L. G. L. & C. Co., supra, “when the company has furnished the gas for a certain month, then there is a liability—an indebtedness arises—and not before.” It is averred in the declaration that Griswold, after the end of the month of July, rendered his bill for gas furnished during that month, amounting to $509.35, which bill was allowed. by the proper authorities of the city and ordered paid, and that a warrant was issued for that sum payable out of the fund appropriated and levied for street lighting purposes. This warrant was issued September 20th, a date subsequent to the date of the passage of the ordinance levying the taxes. It is urged that as it was agreed in the contract that Gris-wold would look alone to the fund to be thereafter appropriated and levied, for his payment, no debt was thereby created against the city for the gas furnished thereunder prior to the ievy of the taxes. As we have seen, the contract was entered into before any taxes were levied to meet the respective monthly payments, and by it the city promised to appropriate a sufficient amount of revenue to be derived from taxation to provide for the liquidation of those monthly bills and to issue to Griswold its warrants against such fund. How it is evident that if the city had failed either to make the appropriation or levy the tax, Griswold could have maintained an action to recover for gas furnished, against the city, except for the constitutional provision preventing it from becoming further indebted. If the city should violate its contract with him to pay out of a particular fund to be raised through its action by taxation, no reason is perceived why he might not sue and recover against the city generally. This contract, it seems to us, created a present indebtedness at the end of each month, but by agreement, it is to be discharged in a particular way; and if this view be correct, this indebtedness is as clearly within the constitutional prohibition as though it was to be paid generally. The contingency upon which it was to be paid out of a particular fund depended upon the further action of the city. If it neglected to perform its. part of the contract the specified means of payment would fail and it would become a general indebtedness against the city. Our conclusion upon that branch of the case is, that the warrants drawn upon the treasury in payment of the gas furnished prior to the actual levy of the tax were illegal and void. Those, however, issued in payment for the gas furnished after the tax levy, rest upon a different basis. It was held in the G.is Light and Coke Company case, supra, that the city had the general power to enter into contracts for the furnishing of gas for city purposes; that such contracts were within the scope of its authority, and, having ■ such general power over the subject-matter of the contracts, the courts should not destroy the contracts made by the parties further than some good reason requires. There can be no serious ground for contention that, if this contract had been mad after the passage of the general appropriation bill wherein the fund for lighting streets was set aside and specified, and the tax levy had been actually made, it would have been free from legal objection, as it would fall within all the limitations and conditions of the Constitution as construed by the court in the decisions referred to above. The city would then have had something to exchange for the gas furnished. Having, then, this general power over the subject in question, ' there seems to be no good reason for holding that if, after such tax levy was actually made, Griswold furnished gas, which was used and accepted by the city, the city might not pay for it by warrants drawn against this particular fund, and in determining the amount to be paid therefor, should adopt the contract price for it. This view, we think, is fully supported by the last case above cited, where substantially the same question was raised, and decided in favor of the gas company. The second question raised upon this record is whether the city can support an action upon the bond in suit for the use of Griswold. The argument is that, as the city is entirely discharged and freed from all obligation to him when it delivers to him the warrant, it has no further interest in the matter ; that Griswold must look to the Treasurer alone for h is payment, and that an action for money had and received against him is the only remedy left to Griswold. To this proposition we can not give our unqualified assent. It may be, perhaps, that such action would be against Flannigan as Treasurer, but we can not concede that such remedy is exclusive. The condition of his bond is, that he will promptly account for and turn over to his successor, or other person designated to receive the same, all moneys, etc., coming to his hands, and shall well and truly perform the duties of the office; then the bond is to be void, otherwise to remain in Ml force, etc. It is averred in the declaration that “said Griswold gave notice to said Flannigan, while he was such Treasurer, and before said money came to the hands of said Flannigan as aforesaid, that he, the said Griswold, would be entitled to said money so to be collected for said fund appropriated for lighting said streets, under his said contract with said city, and presented'to him his said warrant drawn against said appropriation, as aforesaid; and that said Griswold, after said money came to the hands of said Flannigan, and while the latter was still such Treasurer, again presented said warrant to said Flannigan, as such Treasurer, and demanded payment thereof.” The declaration further avers that there came into his hands as such Treasurer over §2,000, appropriated and collected for the purpose of paying for lighting the streets, against which fund these warrants were drawn. How, as we understand the law this $2,000 was none the less a public fund in the hands of the Treasurer, because it was appropriated, levied and collected as a special fund to be applied in the discharge of current expenses of the city for a special purpose—the lighting of the streets. It was as much the duty of the Treasurer under the law and ordinance of the city to pay legal warrants drawn upon and against this fund as it was to pay general warrants from the general funds of the city. The levy and collection of this fund was under the general power of the city, and the whole proceedings were had by the same officers and under the same legal authority and power as though it had not by such warrants been assigned to Griswold. The taxes were levied by competent authority, collected in the usual course and put into the hands of the Treasurer to be paid out upon the legal warrants of the City Council. This he refuses to do; and while the city has not and can not sustain any substantial damages, as no general liability is created, as we have seen, by anticipating the collection of the revenue assessed for a special purpose, it clearly has a right of-action against the Treasurer and his sureties for his failure to perform his official duty in paying oat the funds in his hands accordingly as he should be directed upon warrants of the city legally drawn upon him, when he has in his hands moneys regularly and legally appropriated to the payment of such warrants. This suit is brought by the city, the obligee in the bond, and the party in which the right of action is vested, and the breach alleged is the failure by the Treasurer to pay a legal warrant drawn against a special fund collected in the regular course of law to meet the expenses of the city in this regard. The contention that Griswold must sue the city first and obtain judgment is without force. The city has done all that it is required to do. It has levied the tax and it has been collected in the usual course of proceedings'under the revenue laws. It has been received by the Treasurer for a specified purpose and it has been legally drawn against. The duty of the Treasurer is to pay such legal warrants, and the bond in suit is his official pledge that he will perform such duty. We think this bond is held by the city as a further security •that the Treasurer will perform all his. duties in paying out the funds in his hands to those to whom the City Council, according to the statutes and ordinances of the city, direct payment to be made, and if the Treasurer refuses to comply with his duty, when the means of fulfilling are in his own hands, an action will accrue to the city upon his bond for the use of any party who shows upon the trial that he will be substantially injured by a non-performance of such official duty. In Hurfree on Official Bonds, Sec. 323, it is said: “It is usually provided in statutes authorizing official bonds to be required of state, county or municipal officers, that suits may be brought upon them in the name of the official obligee ‘upon the relation,’ or ‘to the use’ of the party injured by the breach of the bond or interested in its enforcement. Whenever, however, this express provision is omitted in the statute itself, the deficiency is supplied by the construction given to such statutes by the courts whenever a proper case for such a ruling is presented. In a Maryland case (1858) the court held that it was not necessary for a plaintiff, before instituting a suit upon an official bond payable to the State, to obtain the State’s permission to do so; and this, although there was in the "statute which prescribed the bond no specific provision for making the bond payable to the State, or for giving the party interested the right to sue upon it. The court adds, however, that ‘ there js no doubt that it is incumbent on the party suing on the bond, to show that he has an interest in it, before he could recover in a regular trial prosecuted to verdict.’ “ The rationale of official bonds is well expressed by the court in this case. 8 The laws which provide for the execution of bonds similar to the one before us, do not require them for the purpose of protecting the rights of the State alone. They are also designed to secure the faithful performance of official duties, in the discharge of which individuals and corporations have a deep interest, and, therefore, they should have the privilege of suing such bonds for injuries sustained by them through the negligence and malcouduct of the officers?’” This doctrine we consider applicable to the bond in suit, and hold that the city can maintain an action upon the bond to recover substantial damages for the use of Griswold,the really injured party, for a failure to pay those warrants really drawn against tin"s particular fund in the Treasurer’s hands, as indicated in this opinion. The demurrer being general to the whole declaration, where some of the breaches assigned are good, should have been overruled and defendant required to plead. For the reasons stated the judgment will be reversed and the cause remanded for further proceedings. Reversed, and remanded.