Stone v. City of Chicago

69 N.E. 970, 207 Ill. 492

• Court: Illinois Supreme Court
• Decided: February 17, 1904
• Status: Published

Opinion

Mr. Chief Justice Hand

delivered the opinion of the court:

It is first contended that as cities are given power to borrow money with which to pay judgments recovered against such municipalities by the last paragraph of section 3 of article 7 of the City and Village act, that method of raising funds with which to pay the judgment indebtedness of a city is exclusive. By section 1 of said article 7 it is provided that the fiscal year of cities shall commence at the date established by law for the annual election of municipal officers therein, or at such other time as may be fixed by ordinance. By section 2, that city councils shall, within the first quarter of each fiscal year, pass an ordinance to be known as the annual appropriation bill, in which shall be specified such sum or sums of money as may be deemed necessary to defray all necessary expenses and liabilities of such corporations, together with the objects and purposes thereof, and the amount appropriated for each object and purpose, and that no further appropriation shall be made at any other time within such fiscal year unless the proposition to make such appropriation has been first sanctioned by a majority of the legal voters of the city, either by petition or at a general or special election. By section 3, that neither the city council nor any department or officer of the city shall have the right to add to the corporate expenses,' in any one year, anything over and beyond the amount provided for in the annual appropriation bill for that year, and that no expenditure for any improvement to be paid for out of the general fund of the city shall exceed in any one year the amount provided for such improvement in the annual appropriation bill, but that the city council may by a two-thirds- vote order any improvement, the necessity of which is caused by any casualty or accident happening after the annual appropriation has been made, and that the city council by a two-thirds vote may order the mayor and finance committee to borrow a sufficient amount to provide for the expense necessary to be incurred in making any improvement the necessity of which has arisen by reason of any casualty or accident which has happened since tlje annual appropriation has been made, for a space of time not exceeding the close of the next fiscal year, which sum, and the interest thereon, shall be included in the next general tax levy; and should any judgment be obtained against the city, the mayor and finance committee, under the sanction of the city council, may borrow a sufficient amount to pay the same, for a space of time not exceeding the close of the next fiscal year, which sum and interest shall in like manner be added to the amount authorized to be raised in the general tax levy of the next year. And by section 4, that no contract shall be made by the city council, or any committee or member thereof, and no expense shall be incurred by any officer or department of the city, whether the object of the expenditure has been ordered by the city council or not, unless an appropriation shall have been previously made concerning such expense, except as otherwise provided by statute.

The sections of article 7 above referred to pertain to the annual expenditures of cities, and a method is provided therein whereby funds may be raised to meet the temporary pressing financial wants, of such municipalities by a system of short loans, which in no event shall extend beyond the close of the next fiscal year. . Those sections do not, in express terms or by implication, refer to or limit the powers of cities to borrow money on twenty-year bonds, conferred upon such municipalities by paragraph 5 of section 1 of article 5 of the City and Village act, or by section 1 of. the act of 1865, as amended. Neither is the power to make the temporary loans provided for in article 7 inconsistent with the powers conferred upon cities under said other legislative enactments to make long time loans and issue bonds therefor, and from a consideration of all the legislation upon the subject it seems plain that cities have the power to issue twenty-year bonds for the purpose of obtaining funds fpr corporate purposes, and with which to raise money to retire outstanding bonds issued by or other indebtedness due from such municipalities, and that section 3 of article 7 of the City and Village act contains no limitation upon those powers, but that such powers are as full and complete as though said section 3 was not in force.

In the case of City of Huron v. Second Ward Savings Bank, 30 C. C. A. 38, (86 Fed. Rep. 272,) one of the objections made to a recovery upon the bonds sued upon was, that the power granted by the charter to the city council to pay current expense warrants of the city by a tax levy implies the exclusion of the power to fund such warrants by the igsue of negotiable bonds. The court said:- “The contention would be worthy of serious consideration if the express power to issue negotiable bonds was not also granted to the city council by this charter; but the charter grants to the council authority ‘to appropriate money and provide for the payment of the expenses and indebtedness of the corporation, ’ and gives it both the power to levy taxes and the power to borrow money and issue bonds for this purpose. It cannot be that the grant of either of these powers excludes either, and the choice of the method by which the indebtedness of the city should be paid is left to the discretion of the council.”

The question then arises, is the borrowing of money by the issuing of twenty-year bonds, from the sale of which a fund is to be raised wherewith to pay the judgment indebtedness of the city, the pledging of the city’s credit, within the meaning- of paragraph 5 of section 1 of article 5 of the City and Village act, for corporate purposes? Those purposes have been defined to be such purposes as are germane to the objects of the welfare of the municipality, or, at least, have a legitimate connection with those objects and a manifest relation thereto. Anderson’s Law Die. p. 265; Board of Supervisors of Livingston County v. Weider, 64 Ill. 427; People v. Dupuyt, 71 id. 651; Burr v. City of Carbondale, 76 id. 455.

In Taylor v. Thompson, 42 Ill. 9, a tax for a corporate purpose was said to be ope to be expended in a manner which shall promote the general prosperity and welfare of the municipality which levies it.

In National Life Ins. Co. v. Mead, 13 S. Dak. 37, suit was commenced to compel the treasurer of the city of Pierre to pay certain interest coupons. One defense was, that the city was without power to issue funding bonds. The statute under which the bonds were issued was identical with paragraph 5 of section 1 of article 5 of the City and Village act of this State. The court said (p. 43): “It will be observed that this law gives express power to borrow money by issuing bonds for corporate purposes. Did this confer power to issue bonds for the purpose of funding the floating indebtedness? An affirmative answer to this inquiry is supported by the following decisions: Morris & Whitehead v. Taylor, (Ore.) 49 Pac. Rep. 660; City of Huron v. Second Ward Savings Bank, 30 C. C. A. 38; 86 Fed. Rep. 272; Portland Savings Bank v. City of Evansville, (C. C.) 25 Fed. Rep. 389. * * * The statute expressly makes the power to issue bonds co-extensive with the power to borrow money. Either may be exercised for any corporate purpose, and the paymeht of legal1 municipal debts is clearly a corporate purpose. If a city has power to borrow money by issuing bonds for the purpose of lighting its streets, it clearly has power to borrow money in the same manner to pay an indebtedness incurred for the same purpose. Had the legislature contemplated there would be no floating indebtedness under any circumstances, cities would have been authorized to borrow only for the purpose of paying outstanding bonds. We think the city was authorized to issue bonds for the purpose of funding its indebtedness.”

In City of Huron v. Second Ward Savings Bank, supra, which was a suit to recover upon municipal bonds, the court said: “Another objection to these bonds is, that the city of Huron was without power to issue them. The position is not entitled to extended consideration, because the power granted by the charter of the city of Huron is plenary. ' It was general—not special. It was not limited to specific purposes, but was to borrow money and issue bonds for all municipal purposes. It was ‘to borrow money, and for that purpose to issue bonds of the city in such denominations, for such length of time not to exceed twenty years, and bearing such rate of interest not to exceéd seven per cent per annum, as the city council may deem best.’ The whole is greater than any of its parts, and includes them all. The power .to borrow money and issue bonds 'for all municipal purposes includes the power to do so to pay or refund the indebtedness of the municipality.”

If it be a corporate purpose, as We think it is, to issue and sell twenty-year bonds to pay the judgment indebtedness of a city, the bonds in question may be issued under the authority of paragraph 5 of section 1 of article 5 of the City and Village act, notwithstanding that the same power may be conferred by the act of February 13, 1865, as amended, as that act upon its face does not in any way purport to be exclusive. The power given by paragraph 5 of section 1 of article 5 of the City and Village act is a general power, and although other acts may confer on cities and villages the power to issue bonds, the general power conferred upon cities by the City and Village act is not thereby taken away.

If the city has power to issue the bonds the issue and sale of which are sought to be enjoined, by virtue of paragraph 5 of section 1 of article 5 of the City and Village act, a consideration of the power of the city under the act of 1865, as amended, to issue said bonds would seem to be unnecessary. We have, howmver, thought it best briefly to examine the power of the city, under that act, to issue said bonds.

As preliminary to the question of the right of the city to issue said bonds under the act of 1865, as amended, it is said the notice of the election should have been published for three successive weeks, instead of once, as was done, and the ballot used at the election was not in the form prescribed by the statute. Under the authority of Weld v. Rees, 48 Ill. 428, and Jenkins v. Pierce, 98 id. 646, the notice was sufficient; and the only criticism made upon the form of the ballot is, that it contained more, rather than less, than the law required. The ballot was in. form substantially like the one prescribed by the statute, and was sufficient.

It is next contended that a judgment dees not fall within the designation “other evidences of indebtedness issued for money,” within the meaning of the language used in the act of 1865, as amended, and does not, therefore, fall within the purview of that statute. One authority, only, in point,—that of City of Port Huron v. McCall, 46 Mich. 565,-—has been cited upon the proposition that judgments are within the meaning of the language used in that statute. The citj? of Port Huron had issued its bonds in aid of the construction of the Port Huron and Lake Michigan railroad. Default was made and judgment was rendered for the amount thereof against the city. New bonds were issued, and said judgment indebtedness was refunded under the provisions of the following section of the city charter: “No loan, bond or other evidence -of debt not expressly authorized by this act, or any act hereby continued in force, shall be made or issued by the common council or any board or officer of the corporation: Provided, however, that the common council, subject to the approval of the board of estimates, may issue new bonds for the refunding of bonds and evidences of indebtedness already issued.” The new bonds having matured and default having been made in the payment thereof, suit was brought thereon, and the city defended on the ground that the judgment was not evidence of debt already issued, and that the city council was therefore without power to issue said bonds under the foregoing section of its charter, with which to refund said judgment. The trial court overruled the city’s contention, and its judgment was affirmed by the Supreme Court. Judge Cooley, in speaking for the court, in part said: “It is also said that refunding bonds may be issued only for the refunding of ‘bonds and evidences of indebtedness already issued,’ and a judgment is not an evidence of indebtedness issued. A judgment is the act of a court; but the refunding provision intends the obligations which the city itself has issued as evidences of its indebtedness, the bonds, notes, etc.; and this view is strengthened by the following section, (sec. 12, p. 231,) which provides that ‘all bonds and evidences of debt, when refunded, shall be canceled and destroyed by the treasurer, in the presence of the comptroller and a special committee of the common council appointed for that purpose. He shall record and keep an accurate description of all bonds and evidences of debt thus canceled and destroyed.’ A judgment, it is said, cannot be thus canceled and destroyed. * * * This view of the statute is * * * very narrow and technical. * * * It is easy to say that a judgement is not an evidence of indebtedness issued, but it is just as easy to say the contrary, and with quite as good reason. A judgment is not only an evidence of indebtedness, but it is of the highest and most conclusive nature. And there is no straining of language in saying that the judgment is issued. * * * And what difficulty there can be in canceling and destroying a judgment I do not understand. The utterance of the judge pronouncing it cannot be destroyed; the book in which it is entered is to be preserved as a perpetual record; but the judgment as an evidence of indebtedness is canceled when it is paid and receipted. * * * There is a principle of law that municipal powers are to be strictly interpreted; and it is a just and wise rule. Municipalities are to take nothing from the general sovereignty except what is expressly ’ granted; but when a power is conferred which in its exercise concerns only the municipality and can wrong or injure no one, there is not the slightest reason for any strict or literal interpretation with a view to narrowing its construction.”

The reasoning found in the opinion in that case is satisfactory and convincing, and conclusive of the right' of the city of Chicago to issue said bonds under the act of 1865, as amended, to raise a fund from the sale thereof, with which to pay its outstanding judgment indebtedness. The bonds, when issued, will be no less valid by reason of the fact that they may properly be issued under either act,—that is, under paragraph 5 of section 1 of article 5 of the City and Village act, or under the act of 1865, as'amended.

We will next consider the indebtedness of the city of Chicago, with the view of determining whether the issue of said bonds is prohibited by the constitutional prohibition which fixes the limit of said indebtedness at an amount not to exceed five per centum of the value of the city’s taxable property, as shown by the last assessment for State and county taxes. This will be done, taking defendants’ “Exhibit 1” as a basis.

Item I.—In item 1 of said exhibit appears, “Bonds (world’s fair) $4,517,000.” These bonds were issued under section 13 of article 9 of the constitution, of 1870, which section was adopted as an amendment to the constitution in the year 1890. The funds arising from the sale of said bonds were used in aid of the World’s Columbian Exposition. At the time the amendment was adopted the city was in debt beyond the constitutional limit, and the object of the amendment was to confer upon the city power to issue said bonds notwithstanding the constitutional limit of five per cent. It is therefore clear that said bonds should not be taken into consideration in determining the amount of the city’s indebtedness under the debt limit of five per cent fixed by the constitution.

Item II.—An elaborate argument has been presented by the solicitor for appellee with a view to induce the court to hold that the item, “Judgments vs. city, unprovided for, $4,871,182.83,” should not be included in the computation in ascertaining how much the indebtedness of the city is with reference to the constitutional limitation. In City of Chicago v. McDonald, 176 Ill. 404, it was held that judgments were debts against the city, and that the amount thereof should be computed in ascertaining whether the constitutional limitation had been exceeded. We are not disposed to recede from the position taken in that case.

Item III.—The amount, “Due special assessment”fund, $1,518,943.92,” is money held by the city treasurer with which' to pay assessment warrants when presented, and is in no sense a debt of the city. The amount of “Public benefits due from city April 30, 1901, as per verbal report Haskins & Sells, $1,744,347.02,” represents the amounts which the city has been assessed for public benefits in numerous assessment cases and which remain unpaid, and under the authority of Jacksonville Railway Co. v. City of Jacksonville, 114 Ill. 562, is not a debt of the city in the sense of the constitutional limitation.

Item IV.—The “Water fund debt,” amounting to $1,-347,184.39, is an indebtedness of the city. City of Joliet v. Alexander, 194 Ill. 457.

Item V.—The amount of “Anticipation tax warrants, $4,093,000.00,” under the authority of City of Springfield v. Edwards, 84 Ill. 626, is not, in the constitutional sense, a debt of the city.

Item VI.—The evidence shows that $1,049,'606.22 is the total amount in the city treasurer’s hands which can be properly applied for sinking fund purposes. The item, “Due sinking funds, $2,433,656.09,” is not a debt of the city, but the amount in the hands of the city treasurer belonging to the sinking fund should be deducted from the amount of the city’s bonded indebtedness other than world’s fair bonds. Rice v. City of Milwaukee, 100 Wis. 516; Kelly v. City of Minneapolis, 63 Minn. 125.

Item VII.—This item represents the floating indebtedness of the city and the money with which to pay the same, -with the exception of “Accrued interest (corporate), $205,666.54,” is in the city treasury. The “accrued interest” item is a debt. The other items are not debts of the city within the constitutional limitation.

■ We conclude, therefore, that the following items found in said “Exhibit 1” in a constitutional sense constitute the debts of the city and must be taken into account in determining its debt limit:

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Prom the foregoing statement it appears that the issue of the $4,000,000 bonds sought to be enjoined would not increase the indebtedness of the city of Chicago beyond the sum of $20,124,756, its constitutional debt limit.

The position has been taken by appellees that even though the city were found to be indebted beyond the limit prescribed by the constitution, nevertheless the issue of the bonds in question would be valid for the reason that their issue does not increase the indebtedness of the city of Chicago, as the ordinances authorizing their issue provide, “said bonds shall be issued and delivered simultaneously with the surrender, cancellation, satisfaction and release of a like amount of the judgment indebtedness which said bonds are issued to pay.” In view of the fact that the indebtedness of the city does not exceed its debt limit within the meaning of the constitution, the question thus raised has not been considered and no opinion with reference thereto is expressed.

The decree of the circuit court of Cook county will be affirmed.

Decree affirmed.