Town of Sheridan v. Rothschild

104 N.E. 66, 181 Ind. 405, 1914 Ind. LEXIS 45

Opinion

Morris, C. J.

On February 25, 1910, appellee instituted this action against appellant, by complaint in three paragraphs, each declaring on a town warrant executed by appellant to the Fort Wayne Electric Corporation. The three warrants were executed August 20, 1898, each calling for $660.61 and six per cent interest, and payable out of the town’s general fund on July 10, 1899, August 20, 1900, and August 20, 1901, respectively. It is averred that the warrants were delivered and assigned to appellee, by written endorsement, and that the principal and interest thereon remain due and wholly unpaid. A demurrer to the complaint was overruled. Appellant answered by general denial, plea of the ten-year statute of limitations, and further averred that each warrant was void because executed in violation of Art. 13, §1, of the Indiana Constitution, adopted March 14, 1881, which declares that no municipal corporation shall become indebted for any purpose, in an amount exceeding two per cent on the value of the taxable property of the corporation. In this paragraph it is averred that when the warrants were executed, appellant was already indebted beyond its constitutional limit. In its fourth paragraph of answer, appellant avers that the warrants were executed in payment of a debt due said electric corporation on a contract for the installation of an electric light plant; that the work of installation was not completed until May 1, 1898, and that at that time the town was already indebted in a sum- beyond the constitutional limit of two per cent on its taxables.

The cause was tried by the court, with a special finding of facts, and conclusions of law, to which appellant failed to except. Judgment was rendered for appellee on the warrants falling due in 1900 and 1901. The court concluded that the action on the warrant due in 1899, was barred by the statute of limitations.

1.

Appellee has filed a motion to transfer this appeal to the Appellate Court, because the judgment is for a sum less than' $6,000. Appellant based one of its causes of defense on a right guaranteed by our Constitution. Jurisdiction to determine such appeals is vested exclusively in this court. Subd. 1, §1, Acts 1907 p. 237, §1392 Burns 1908; Curless v. Watson (1913), 180 Ind. 86, 102 N. E. 497. The motion to transfer is overruled.

2.

3.

Appellant contends that the court erred in overruling its demurrer to the complaint. Its failure to set out the demurrer, or the substance thereof, in its brief, preeludes a consideration of the ruling. It also claims error in each of the court’s conclusions of law on the facts specially found. The failure to except to the conclusions waives their consideration. Appellant’s motion for a new trial, grounded in part on the alleged insufficiency of the evidence to support the decision, was overruled, and that question is properly presented here for review.

4.

There was no material conflict in the evidence, which shows that on January 8, 1898, pursuant to the provisions of the act of March 1, 1893 (Acts 1893 p. 185, §§4363-4372 Burns 1901), appellant entered into a contract with the Fort Wayne Electric Corporation for the installation of certain machinery for an electric light plant, and, at the same time entered into a contract with the Eussel Engine Company, to furnish an engine for the plant, to supply the necessary power. By the terms of the contract the electric corporation was to be paid $4,870 for its work when completed. The contract with the engine company provided for the payment of $2,165 on the completion of its work. Subsequently, during the progress of the work of installation, the contract with the electric corporation was so modified as to provide for an additional compensation of $250, for extras furnished, making its entire contract price $5,120. It is conceded that in 1895 the civil town, by the laws then in force, became indebted for the payment of schoolhouse bonds, for $3,500, with six per cent interest payable semi-annually on April 1 and October 1, of each year. Wilcoxon v. City of Bluffton (1899), 153 Ind. 267, 54 N. E. 110; Eddy Valve Co. v. Town of Crown Point (1906), 166 Ind. 613, 76 N. E. 536, 3 L. R. A. (N. S.) 684. No part of such bonded indebtedness matured previous to /1899. It is further conceded that the two per cent debt limit for appellant, in 1898, was $9,626. On January 8, 1898, the town had no building or site for the contemplated \plant. It afterward bought a lot, and erected a building thereon, for such purpose, at an expense of from $1,200 to $1,400, and paid for the same out of the proceeds of a $6,000 bond issue. Some time after the letting of the contracts for the engine and electrical machinery of the plant, appellant’s officers began negotiations for a bond issue to procure money to pay for the entire plant. They were disappointed on learning that, because of the debt limit, they could not find a purchaser for an issue in excess of $6,000, but, on March 24, 1898, the town sold for $6,060, bonds dated March 1, 1898, of the face value of $6,000, with six per cent interest. The expense of selling the same was $60. The proceeds of the bond sale, excepting enough to pay for the lot and building, already erected, were divided between the electric and engine companies, as follows: the electric company was paid $2,435, on March 24, 1898, and, on April 8, the further sum of $700, leaving a balance of $1,985, for which, less a small amount, the warrants in suit were subsequently issued; on March 25, the engine company was paid $1,523. The evidence does not disclose what progress had been made previous to March 24, by the engine and electric companies toward the completion of the installation work; however, it does show that it was intended that it should be finished during the month of April, but there was an unavoidable delay which prevented the completion until May 1, when it was accepted, as finished. The total town revenue, for the general fund, available in 1898, was $797, which was scarcely sufficient to pay officers’ salaries and other necessary current expenses. It is conceded that in 1898, it was impossible to pay for any electric installation work from current revenues of that year. Counsel for appellee admit that when the work was completed on May 1, and thereafter when the warrants were executed on August 20, the town was indebted beyond its constitutional limit, but they base their contention of validity on the theory that the warrants were executed as evidence of the town’s indebtedness under its contract of January 8, with the electric corporation, and that the indebtedness was fixed on that date; that then the town’s school bond debt, added to the electric company’s contract price, amounted to less than the town’s debt limit of $9,626. Appellee’s counsel say they presented the case on such theory below, and that the trial court adopted it. The theory is erroneous. The question as to time when indebtedness arises, in contemplation of such constitutional limitations as is here involved, may, in some eases, be difficult of answer. Note to Hagan v. Commissioners Court (1909), 37 L. R. A. (N. S.) 1062. It must be conceded that under an ordinary contract for the sale of machinery or other chattels, no indebtedness is created prior to delivery. City of Logansport v. Jordan (1908), 171 Ind. 121, 85 N. E. 959, 37 L. R. A. (N. S.) 1036, 17 Ann. Cas. 415.

The statute under which this work was done (Acts 1893 p. 185, supra,) provides for no bond to secure the performance of the contract, but it does declare that “the contractors for said plant shall not be paid to exceed 75 per cent of the contract price thereof until said plant has been successfully operated and shown to be fully equal to specifications embraced in said contract, for a period of at least 90 days after the completion of said plant.” It is quite obvious that a debt might exist from the time of the execution of a contract that provides for a deferred payment by the obligor ; yet, considering that this electric company was agreeing only to deliver and install certain electrical machinery, and considering the provisions of the act of March 1, 1893, we are of the opinion that no indebtedness existed here, until the completion of the work, and then only to the extent of 75 per cent of the contract price; that the indebtedness for the remaining 25 per cent did not arise until at least 90 days after the completion of the work. See Cason v. Lebanon (1899), 153 Ind. 567, 55 N. E. 768, and cases cited. It appears that the contract with the Fort Wayne Electric Corporation, was for only a part of the plant, and was executed at the same time as was that with the Russel Engine Company. These two contracts called for an expenditure of $7,285. Before either of them could be completed, it was necessary for the town to furnish a site and building, which entailed a cost of at least $1,200. The debt limit on January 8, was little more than $6,000. The letting of the contract was in violation of §5, Acts 1893 p. 185, §4367 Burns 1901, which required the rejection of bids where the price of the plant exceeded the debt limit.

5.

However, in view of the conclusions we have reached, it is unnecessary to consider the question of the validity of the warrants on the assumption of the existence of the indebtedness at the time the contract was executed. Under the facts here disclosed no indebtedness to appellee’s assignor existed prior to the completion of the contract, and consequently there is no liability on the warrants. Judgment is reversed with instructions to sustain appellant’s motion for a new trial.

Note. — Reported in 104 N. E. 66. As to what is within the meaning of prohibition against indebtedness in respect of municipalities, see 44 Am. St. 229.