Brix v. Clatsop County

80 P. 650, 46 Or. 223, 1905 Ore. LEXIS 31

• Court: Oregon Supreme Court
• Decided: April 24, 1905
• Status: Published

Opinion

Mr. Justice Bean

delivered the opinion of the court.

In June and October, 1904, Clatsop County made, contracts with the defendants Hastie & Dugan, to furnish the materials and labor necessary for the construction, according to certain plans and specifications, of a court house for $116,200.30. After a part of the work had been performed, the contractors refused to proceed further because of a doubt as to the validity of their contract, due to the fact that the county was in debt at the time it was made in excess of the constitutional limit. At the recent session of the legislature an act was passed (Laws 1905, chap. 6, p. 64,) authorizing the levy of a special tax upon all the taxable property of the county, to be continued through a series of years, for the purpose of “purchasing, erecting, building and furnishing a court house.” Section 1 of this act provides that the county court, at its January term, 1905, shall levy a tax of not to exceed five mills on the dollar on all the taxable property in the county, ■ to continue through a series of years to be determined by the court, for the purpose of constructing a court house; that the order of the court shall specify the amount of the levy, the number of years the tax is to run, and the purpose for which it is levied, and thereafter without further order, the levy shall be held good and valid, and shall be extended on the assessment roll and collected in the same manner that all other taxes are extended and collected, each and every year therafter, until the full series of years designated shall' have expired; that the money arising therefrom shall be kept separate and apart from other funds, and be known as the “Court Souse Fund.” By section 2 the county court is authorized to purchase from the former contractors and the architect their interests in the building designed as a court house, and pay therefor, in warrants on the fund to be derived from the special tax, an amount equal to the warrants theretofore issued to them on account of such building, and to contract for the completion and furnishing of the partially constructed building so purchased in accordance with the plans and specifications already adopted or such as might thereafter be approved by the court, but payment thereof should be made, only in warrants on the special fund. Section 3 requires the county court to recall and cancel all outstanding warrants theretofore issued on account of the construction of the building. Section 4 declares that the contract for the. completion and furnishing of the building shall provide that payment therefor shall be made only with money to be collected and placed in the special court house fund, and that no part of the contract price shall be held to be an indebtedness against the county or become due or payable-until sufficient money shall be collected by the special tax to pay the warrants drawn against the same, and that the act authorizing the levy and the making of the contract shall be a part of such contract. Section 5 provides that no warrants shall be drawn on such special fund except by order of the county court for the construction, completion or furnishing of the court house, and that such warrants shall not be paid from any other fund and no money from any other source shall ever be transferred to such fund. Section 6 requires the county treasurer to keep the money received on the special tax separate and apart from other funds, and to pay it out only on warrants issued by the. county court on account of the construction of the court house. Section 7 declares that no part of the purchase price of the interests of the former contractors or architect in the uncompleted building, or any part of the contract price for the. completion or furnishing of the court house, shall be held to be an indebtedness against the county.

■The act contained an emergency clause and was filed in the office of the Secretary of State January 27, 1905. Immediately thereafter the county court, in pursuance of the authority thus attempted to be conferred upon it, made an order levying a special tax of five mills on the dollar on all the taxable property in the county, to continue through a series of 15 years, commencing with the year 1905 ánd ending with the year 1919, for the purpose of purchasing, erecting, building and furnishing a court house. It also purchased of the contractors and architect their interests in the uncompleted building, and entered into a contract with the defendants Hastie & Dugan for the completion thereof for the sum of $103,800.30, to be paid only in warrants on the special fund arising from such tax. It was stipulated in the contract that the warrants issued in payment for the building should be accepted in full satisfaction of any and all claims against the county arising out of the contract, and that they would look solely to the special fund for the payment thereof. At the time the tax was levied and the contract made, the county was in debt more than $70,000 over and above the amount permitted by the constitution, and it is claimed and alleged by the plaintiffs that by reason of such fact the contract was and is void.

The constitution provides that no county shall create any debts or liabilities which shall singly or in the aggregate exceed the sum of $5,000, except to suppress insurrection or repel invasion: Const. Or. Art. XI, § 10. A debt or liability, incurred for the construction of a court house is within the provision of the constitution, and, if incurred in violation thereof, is void: Eaton v. Mimnaugh, 43 Or. 465 (73 Pac. 754). If, therefore, the contract in question created a debt or liability against the county, it is void- That the act of 1905 authorizing the levy of the special tax and the making of the contract for the construction of the' court house was designed and intended to enable the county to avoid the provisions of the constitution is apparent. The position of the defendants is that such a result was successfully accomplished, and no debt or liability was created against the county by the contract for the construction of the court house, because a special tax to continue for 15 years, to provide a fund for the payment of the contract price, was levied prior to the making of the contract, and such contract contained a stipulation that the cost of the building should be paid only from such' special fund.

There are decisions of able and respectable courts holding that when, at the time a contract presently to become due, is made by a county or a municipality, a fund is on hand and appropriated to its payment, or a fund such as current taxes has been provided, but is uncollected, or an appropriation is made of the future income of a revenue producing property belonging to the municipality, such as waterworks and the like, and the contract is expressly made payable only out of such funds or revenue, with no recourse on the municipality, it does not create a debt or liability against the corporation, within the meaning of constitutional or charter limitations similar to those contained in our constitution: People ex rel. v. May, 9 Colo. 404 (12 Pac. 838); City of Springfield v. Edwards, 84 Ill. 626; Law v. People, 87 Ill. 385; Fuller v. Heath, 89 Ill. 296; Winston v. Spokane, 12 Wash. 524 (41 Pac. 888); Faulkner v. Seattle, 19 Wash. 320 (53 Pac. 365); Dively v. City of Cedar Falls, 27 Iowa, 227; Grant v. City of Lavenport, 36 Iowa, 396; Doon Township v. Cummins, 142 U. S. 366 (12 Sup. Ct. 220, 35 L. Ed. 1044). This doctrine rests upon the theory (to. use the language of one of the decisions cited) that the contract amounts, in. effect, to “an assignment pro tanto, without recourse, by the county of the fund,” or (to use that of another) “one thing is simply given and accepted in exchange for another.” In such case the transaction is deemed closed on the part of the municipality when the warrant or order on the special fund is issued and accepted, thereby leaving no further liability or obligation, either absolute or contingent, against it, whereby its debt may be increased. But to have this effect, it seems obvious to us, there must be at the time the contract is made a fund belonging to the municipality, having either an actual or a potential existence, concerning which the parties may contract. Otherwise there is nothing, to assign or exchange. The assessment and collection of a tax on the property of the inhabitants of a municipality in the future, for the benefit of a particular individual, and in payment of an obligation incurred by the municipal authorities, necessarily, it seems to us, implies a debt or liability against the municipality which the holder is entitled to have paid with money derived from taxation. The constitution plainly prohibits a county from contracting debts or liabilities which singly or in the aggregate shall exceed $5,000, except for a specific purpose. A contract by it to pay a certain sum of money in the future, with interest, out of money to be thereafter raised by general taxation from all the people, whether the levy be made at one time, covering that future, or has to be made yearly, is manifestly a debt or liability against the municipality; and no technical process of reasoning, legal acumen, or jugglery of words can make the fact otherwise. The moment an obligation to pay money is voluntarily incurred by a municipality with no funds or assets in its treasury, nor current funds or revenue collected or in process of collection, for the payment of the same, that moment such obligation must be considered in determining its indebtedness, however carefully the law or the contract under or by which it was incurred may attempt to shift the burden from the corporate entity to the taxpayers. To hold otherwise would be to make an unwarranted distinction between the taxpayers in their organized capacity and the same persons as individuals. In the payment of obligations incurred by the officers of a municipal corporation from money raised by taxation, there is no room for a distinction between the corporation itself and the taxpayers. The money must come from the taxpayers, whatever may be the language of the law authorizing its exaction, or of the contract providing for its payment, and the constitution cannot be avoided by providing a.special tax to be levied in advance for a series of years, and making such contract payable alone therefrom: Hodges v. Crowley, 186 Ill. 305 (57 N. E. 889).

Stripped of all subterfuge, the act of the legislature authorizing the defendant county to levy a special tax for court house purposes, and the contract made by it in pursuance thereof, are an attempt to permit the county, although already in debt largely beyond the constitutional limit, to impose an additional indebtedness of over $100,000 upon its taxpayers, by attempting to make a distinction between the county as a corporate entity and the individual taxpayers. If this may be done for the construction of a court house, it may be done for highways, bridges, poor farms, hospitals, jails, and the. like corporate expenses, and the property of the taxpayers may thus be burdened for years to come, contrary to the provisions and spirit of the constitution. It would not be particularly comforting to a taxpayer so situated to be told, while groaning under such special levies, extending hopelessly into the future, that he could congratulate himself that he lived in a county which was not indebted more than $5,000. The reasoning which results in such a conclusion is to us unsound. The constitution was intended to protect the taxpayers. Its language is plain and unambiguous, and the court is not justified in giving it a strained or as.tute interpretation to avoid individual or local hardship. It is its duty to enforce the provisions as written, according to their plain and obvious meaning, and not to permit it to be circumvented by shifting the burden of a debt from the municipal entity to the taxpayers. Swanson v. City of Ottumwa, 118 Iowa, 161 (91 N. W. 1048, 59 L. R. A. 620), is contrary to this view; but the question decided in that case arose about the same time in a case pending in the circuit court of appeals, and was there decided adversely-to that of the Iowa court: Ottumwa v. City Water Co. 119 Fed. 315 (56 C. C. A. 219, 59 L. R. A. 604). The opinion in the latter case, written by Judge Locitren, was concurred in by Judges Sanborn and Thayer, and is a clear, able and convincing decision, and seems to us a more logical, reasonable, and safe one than that of the Iowa court.

The decree of the court below is therefore reversed, and one will be entered here as prayed for in the complaint. •

Reversed.