White River Sav. Bank of White River Junction v. City of Superior

SEAMAN, Circuit Judge, after the foregoing statement, delivered the opinion of the court. The issuance of the bonds in suit and their sale by the city of Superior in November and December 1891, at 94 per cent, of the face and accrued interest, are conceded facts; and the findings are that the plaintiff in error purchased them from the holder, at par, more than four years after they were issued, while the city had promptly paid the interest meantime. Each bond bears the designation “Street Improvement Bond,” and recites that it is issued by authority of chapter 16 of the city charter of 1889 (chapter 152, p. 407, Daws 1889), for street improvements upon portions of a certain street described in the bond, and “is made chargeable upon the property abutting” thereon, “as evidenced by a statement and schedule of such special assessment on which the bonds are issued, as recorded.” Recovery is sought against the city, as a general obligation assumed by it, in thus issuing and selling the bonds, and not dependent upon the collection of the special assessments re*-ferred to. The primary test of liability, therefore, irrespective of the recitals, is, whether the charter provisions vest power in the city to incur such general obligation in any event. That power to borrow money “does not belong to a municipal corporation [5] as an incident of its creation,” and “must be conferí ed by legislation, either express or implied,” is stated by Mr. Justice Bradley, in the prevailing opinion in The Mayor v. Ray, 19 Wall. 468, 475, 22 L. Ed. 164, as the general doctrine. See 1 Dillon’s Municipal Corp. (4th Ed.) §§ 122, 125. The only dissent from this expression of the rule — and as well the diversity of opinion in the general authorities' — -arises out of the strict limitation it may impose in reference to an implied power. It is well settled, however, that the municipality can incur no indebtedness for an object not within the powers, express or implied, granted by its charter, and that the purchaser of a bond is chargeable with notice of the charter powers, when the purpose is fully disclosed in the bond recitals. If the city of Superior was not empowered to assume and pay for the improvements described in the bond, or incur indebtedness for such expenditure, as a general municipal charge, it is plain that such liability cannot be imposed in this action. The purpose and material facts are recited in the bonds and none of these recitals tend to the view of general liability — aside from the formal promises of the city and pledge of its “faith and credit” — while the purchaser is bound by the law and facts thus brought to his attention. The meaning and policy of sections 143 and 144 are unmistakably this: That the expense for the original or “first instance” of permanent improvement of a street or alley, to the extent of its frontage on abutting lots shall be borne exclusively by and made chargeable to such abutting lots, in proportion to benefits assessed under other provisions ; and that the remaining expense of such improvement, at the intersections of streets and alleys and across public grounds, shall be borne by the city at large. The succeeding sections, from- 145 to 156 inclusive, provide for the assessment against abutting lots, the letting of the work and the giving of certificates to- the contractor of amounts chargeable to lots. Section 157 authorizes the contract for the work “chargeable to the abutting real estate” to provide “’that the amounts so chargeable may be paid with certificates against the lots or in improvement bonds, or that payment may be partly made in certificates and part in cash or improvement bonds, or both.” Section 158 prescribes the notice to be given when improvement bonds are intended, stating the purpose “to issue bonds chargeable to the abutting real estate, to pay the special assessments,” except where owners elect to pay. Section 159 provides for issuing the bonds to “contain such recitals as may be necessary to show that they are chargeable to particular property, specifying the same.” They are to be made “payable at the option of the city after five years and absolutely at the expiration of seven years,” and bear interest, not exceeding 6 per cent, (section 160); the city clerk is to record a statement of the assessments with a copy of the bonds (section 161); the treasurer is to pay accruing interest and principal “and charge the amount to the proper hind” (section 162); one-fifth of the special assessment, with 6 per cent, interest, “shall be extended on the tax roll as a special tax on” the lots so asssessed, “and thereafter this tax shall be treated in all respects as any other city taxes,” and when col [6] lected “credited to the fund against which payments on said bonds are charged” (section 163); and no action to avoid the assessments shall be maintained after the bonds are issued (section 164). No departure from the .above-mentioned purpose of sections 143 and 144 is stated in terms in either of these provisions, nor is any express provision or authority found elsewhere in the charter which makes the bonds general obligations. But the contention is in substance, that such intent must be inferred from1 the provisions for issuing improvement bonds; that in such event, the city elects to thus raise the means to pay for the improvement; and that it. is “then reimbursed out of the assessments when collected.” If this view were otherwise tenable, it is, as we believe, inconsistent with the general provisions of the charter, particularly section 103, that: “The common council shall have authority to issue bonds for the following specific purposes only” — and then specifies objects, none of which are applicable to special assessments. In other sections: funds from special assessments are excepted from control of the common council (section 92) ; money cannot be appropriated for purposes not expressly authorized (section 93); and orders cannot be drawn upon the treasurer unless money is in his hands to the credit of the fund (section 95). The question, however, whether this issue of improvement bonds became a general obligation against the city, under the provisions of the charter of 1889, was recently (1902) before the Supreme Court of Wisconsin, in Uncas National Bank v. Superior, 115 Wis. 340, 344, 91 N. W. 1004, and it was decided, in a well considered and unanimous opinion, that the city was without power to incur general liability for the purpose, and that the bonds were not enforceable otherwise than through the special assessment provisions of the charter. While the interpretation referred to occurred long after the issue and sale of these bonds, so that we may not rest upon it as conclusive of rights acquired by the plaintiff in error, we concur in such interpretation, recognizing, not only its importance and weight as the rule of that court, but satisfied of its correctness, upon independent consideration of the statute. The contention upon behalf of the plaintiff in error that a prior decision of the same court (1893) in Fowler v. City of Superior, 85 Wis. 411, 415, 54 N. W. 800, is controlling in respect of the rights involved in this suit, or at least strongly persuasive, against the construction adopted in the Uncas National Bank Case, is without force, for the reason that it arose under and involves only the provisions of a subsequent charter of 1891 (chapter 124, p. 774, Laws 1891), which differed in material terms from the charter of 188$. Were the provisions involved in the Fowler controversy substantially identical with those involved here, the determination would not be free from difficulty, in view of the facts found in reference to the negotiation of the bonds in suit. In this court, prior to the' decision in the Uncas National Bank Case, the question of liability arose, in King v. City of Superior, 54 C. C. A. 499, 501, 117 Fed. 113, upon bonds in like form, issued under the charter of 1891, and it was then rightly treated as set at rest by the,decision in the Fowler Case; but the rule fol [7] lowed there is not applicable to bonds issued under the charter of 1389. In Uncas National Bank v. Superior, 115 Wis., the opinion (page 349, 91 N. W. 1007) points out important distinctions between the charters of 1889 and 1891, and construes the charter of 1889 as conferring no power to incur general obligation for payment of the bonds, “notwithstanding what was said in the Fowler case.” Other distinctions appear, not mentioned in that opinion, namely, section 133 of the charter of 1891, authorizes such other recitals in the bonds “as the common council may think proper to insert,” not provided in the prior charter. Section 133, referring to the issue of improvement bonds, expressly authorizes sale of the bonds in installments, by the common council “at not less than par value” and collection of the proceeds to be “paid to the contractor,” while no such provision appears in 1889, nor any mention of sale of the bonds. Section 130 provides that the work may be paid in certificates, bonds or the “proceeds of the sale of such bonds,” while use of the proceeds is not mentioned in the charter of 1889. We are of opinion, therefore, that the construction of the statute under which the bonds in suit were issued, is unaffected by the Fowler Case; that no power is vested in the municipality to assume payment or obligation to pay, in any event, the expense of the improvements in question as a general liability; that the bonds are not enforceable, nor the purchase money recoverable, against the city upon any theory of the present action; and that the court below rightly dismissed the complaint on the merits. The judgment accordingly is affirmed.