a rule, live in the condition of constant indebtedness, exceptions to which are of very rare occurrence.

Amount.

Clothed with the power of eminent domain, and the inherent power to contract, and required to exercise police powers, and some of these at its peril, a municipality must necessarily incur large expense, the amount of which, under the American rules of local self-government, properly rest in the discretion of the municipality; and, in the absence of constitutional or statutory limitations, this discretion as to amount is unbounded. The law is, however, imperative the stitute a valid indebtedness, the expenditure must be incurred within charter powers and for municipal purposes. Within these boundaries the municipality may go on incurring indebtedness at its pleasure to the statutory limit.

LIMITATION OF INDEBTEDNESS.

148. Limitation to municipal indebtedness may be fixed either by statute or constitution, beyond which no obligation can be incurred by the municipality.

Limitations upon municipal indebtedness, either by constitution or statute, are to be found in nearly all the American states. The limit is usually fixed at a certain per cent. or aliquot part of the total assessed value of real estate, or real and personal property, in the corporate limits. The form of

1 Coggeshall v. Des Moines, 78 Iowa, 235, 41 N. W. 617; City of Galena v. Corwith, 48 Ill. 423, 95 Am. Dec. 557.

2 Brenham v. Bank, 144 U. S. 173, 12 Sup. Ct. 559, 36 L. Ed. 390; Id., 144 U. S. 549, 12 Sup. Ct. 975, 36 L. Ed. 399; CLARK v. DES MOINES, 19 Iowa, 199, 87 Am. Dec. 423; Bissell v. Kankakee. 64 Ill. 249, 21 Am. Rep. 554; HASBROUCK v. MILWAUKEE, 13 Wis. 37, 80 Am. Dec. 718; Hequembourg v. Dunkirk, 49 Hun, 550, 2 N. Y. Supp. 447.

3 Nalle v. Austin (Tex. Civ. App.) 42 S. W. 780; Duncan v. Charleston, 60 S. C. 532, 39 S. E. 265; Keller v. Scranton, 200 Pa. 130, 49

such constitutional inhibition is usually such as to prevent either the legislature or the municipality from passing the constitutional limit; in which case all indebtedness, howsoever incurred, beyond this limitation is void. Limitation may also

Atl. 781, 86 Am. St. Rep. 708; Herman v. Oconto, 110 Wis. 660, 86 N. W. 681; Rice v. Milwaukee, 100 Wis. 516, 76 N. W. 341; Allen v. Davenport, 107 Iowa, 90, 77 N. W. 532; Reynolds v. Waterville, 92 Me. 292, 42 Atl. 553; Weber v. Dillon, 7 Okl. 568, 54 Pac. 894; Phillips v. Reed, 107 Iowa, 331, 76 N. W. 850; Freeman v. Huron, 10 S. D. 368, 73 N. W. 260; Darling v. Taylor, 7 N. D. 538, 75 N. W. 766; School Town of Winamac v. Hess, 151 Ind. 229, 50 N. E. 81; Graham v. Spokane, 19 Wash. 447, 53 Pac. 714; Faulkner v. Seattle, 19 Wash. 320, 53 Pac. 365; Epping v. Columbus, 117 Ga. 263, 43 S. E. 803; Roff v. Calhoun, Id.; Swanson v. Ottumwa, 118 Iowa, 161, 91 N. W. 1048, 59 L. R. A. 620; Beck v. St. Paul, 87 Minn. 381, 92 N. W. 328; Kronsbein v. Rochester, 76 App. Div. 494, 78 N. Y. Supp. 813; City of Austin v. Valle (Tex. Civ. App.) 71 S. W. 414; People v. City Council, 23 Utah, 13, 64 Pac. 460. See, also, Browne v. Boston, 179 Mass. 321, 60 N. E. 934.

The Constitution of Pennsylvania illustrates such an inhibition in few words: "The debt of any city, except as herein provided, shall never exceed seven per centum upon the assessed value of the taxable property therein."

Where the actual and assessed value of taxable property is not the same, the computation is to be made upon the assessed value. City Water Supply Co. v. Ottumwa (C. C.) 120 Fed. 309.

4 Balch v. Beach, 119 Wis. 77, 95 N. W. 132; Grady v. Landram, 23 Ky. Law Rep. 506, 63 S. W. 284; Duncan v. Charleston, supra; City of Helena v. Mills, 94 Fed. 916, 36 C. C. A. 1; City Water Supply Co. v. Ottumwa, supra; German Ins. Co. of Freeport v. Manning (C. C.) 95 Fed. 597. See State v. Quayle, 26 Utah, 26, 71 Pac. 1060; City of Baltimore v. Gill, 31 Md. 375; People v. May, 9 Colo. 80, 10 Pac. 641; Buchanan v. Litchfield, 102 U. S. 278, 26 L. Ed. 138; Dixon County v. Field, 111 U. S. 83, 4 Sup. Ct. 315, 28 L. Ed. 360; LITCHFIELD v. BALLOU, 114 U. S. 190, 5 Sup. Ct. 820, 29 L. Ed. 132; Lake County v. Rollins, 130 U. S. 662, 9 Sup. Ct. 651, 32 L. Ed. 1060; SPILMAN v. PARKERSBURG, 35 W. Va. 605, 14 S. E. 279; Quill v. Indianapolis, 124 Ind. 292, 23 N. E. 788, 7 L. R. A. 681; City of Indianapolis v. Wann, 144 Ind. 175, 42 N. E. 901, 31 L. R. A. 743; John Hancock Mut. Life Ins. Co. v. Huron, 100 Fed. 1001, 40 C. C. A. 683; Prickett v. Marceline (C. C.) 65 Fed. 469.

5

be fixed in the charter, or by general statute, which cannot be transgressed by the municipality; but such boundary being fixed by the legislature may likewise be transgressed by it, and indebtedness beyond the statutory limit may be imposed upon the municipality by the legislature."

Kinds of Indebtedness.

The recognized classes of municipal indebtedness are two, (1) bonded and (2) current; and much contention has arisen, in consequence of the joint efforts of reckless municipalities and speculative investors to transgress the prescribed limits, as to whether the prohibition included all classes of municipal indebtedness. In some cases there is manifested a disposition in the courts to give liberal construction to such limitations; but by far the greater weight of authority favors such strict construction of these statutory and constitutional prohibitions as will include all classes of debts, and thereby protect the citizens from overburdensome taxation.R

5 Jutte & Foley Co. v. Altoona, 94 Fed. 61, 36 C. C. A. 84; McDON ALD v. NEW YORK, 68 N. Y. 23, 23 Am. Rep. 144; Keeney v. Jersey City, 47 N. J. Law, 449, 1 Atl. 511; Nelson v. Mayor, 63 N. Y. 535; Mayor of Rome v. McWilliams, 67 Ga. 106.

6 Mosher v. School Dist., 44 Iowa, 122.

7 Wells v. Sioux Falls (S. D.) 94 N. W. 425; Barnard & Co. v. Knox County (C. C.) 37 Fed. 563, 2 L. R. A. 426; KELLY v. MINNEAPOLIS, 63 Minn. 125, 65 N. W. 115, 30 L. R. A. 281; State v. Common Council, 96 Wis. 73, 71 N. W. 86; Todd v. Laurens, 48 S. C. 395, 26 S. E. 682.

8 Schultze v. Manchester, 40 Atl. 589; City of Chicago v. McDonald, 176 Ill. 404, 52 N. E. 982; City of Laporte v. Telegraph Co., 146 Ind. 466, 45 N. E. 588, 35 L. R. A. 686, 58 Am. St. Rep. 359; City of Walla Walla v. Water Co., 172 U. S. 1, 19 Sup. Ct. 77, 43 L. Ed. 341; Niles Water Works v. Mayor, 59 Mich. 311, 26 N. W. 525; Buck v. Eureka, 124 Cal. 61, 56 Pac. 612; Lake County v. Graham, 130 U. S. 674, 9 Sup. Ct. 654, 32 L. Ed. 1065; People v. May, 9 Colo. 414, 15 Pac. 36; District Tp. of Doon v. Cummins, 142 U. S. 366, 12 Sup. Ct. 220, 35 L. Ed. 1044; Francis v. Howard County (C. C.) 50 Fed. 44.

Sum Total-How Computed.

By the weight of judicial opinion the total amount of municipal indebtedness is to be ascertained by adding together all bonded and current indebtedness, including both imposed and voluntary, and not only present but future obligations, if they be vested or fixed,1o and also the annual sum payable upon any continuing contract of rental or service.11 The sum total thus ascertained will be the limit to the municipal power to incur indebtedness.

MUNICIPAL BONDS.

149. Municipal bonds are now generally understood to mean negotiable bonds issued by a municipality as security for its indebtedness.

Municipal bonds are not necessarily negotiable. They may in form lack some element of negotiability, or may include some phrase rendering them nonnegotiable. But the custom of making such bonds negotiable in form has become so prevalent as to be almost universal, and the term "municipal bonds"

Sackett v. New Albany, 88 Ind. 473, 45 Am. Rep. 467; LITCHFIELD V. BALLOU, 114 U. S. 190, 5 Sup. Ct. 820, 29 L. Ed. 132; Lake County v. Rollins, 136 U. S. 662, 9 Sup. Ct. 651, 32 L. Ed. 1060; Epping v. Columbus, 117 Ga. 263, 43 S. E. 803; Balch v. Beach, 119 Wis. 77, 95 N. W. 132; Stone v. Chicago, 207 Ill. 492, 69 N. E. 970.

10 City of Laporte v. Telegraph Co., 146 Ind. 466, 45 N. E. 588, 35 L. R. A. 686, 58 Am. St. Rep. 359; Beard v. Hopkinsville, 95 Ky. 239. 24 S. W. 872, 23 L. R. A. 402, 44 Am. St. Rep. 222; Niles Water Works Co. v. Mayor, supra.

11 Baltimore & O. S. W. R. Co. v. People, 200 Ill. 541, 66 N. E. 148; Stedman v. Berlin, 97 Wis. 505, 73 N. W. 57; Crowder v. Sullivan, 128 Ind. 486, 28 N. E. 94, 13 L. R. A. 647; Lott v. Mayor, 84 Ga. 681, 11 S. E. 558; Brown v. Corry, 175 Pa. 528, 34 Atl. 854; City of East St. Louis v. Coke Co., 98 Ill. 415, 38 Am. Rep. 97; Smith v. Dedham, 144 Mass. 177, 10 N. E. 782. But see City of Centerville v. Guaranty Co., 118 Fed. 332, 55 C. C. A. 348; Cain v. Wyoming, 104 Ill. App. 538; Niles Water Works Co. v. Mayor, supra; State v. Medbery, 7 Ohio St. 523.

in modern parlance implies negotiability.12 They are generally issued as security for a loan of money to the municipality. But sometimes they are used to subsidize a quasi public corporation engaged in some undertaking of advantage to the municipality, such as a railroad, gas, water, or electric company.

BORROWING MONEY.

150. Express power to incur indebtedness by borrowing money on the municipal credit may be conferred upon a municipal corporation either by charter or by general law.

Like power may also be implied as appropriate and necessary for the proper and efficient exercise of the municipal powers expressly conferred upon the corporation.

Lacking express or implied power for such purposes, a municipality does not possess inherent power to incur municipal indebtedness by borrowing money on municipal credit.

Until the era of municipal extravagance had come to America, municipal corporations had been wont to borrow money, and give their notes or bonds therefor, without serious doubt or question as to the existence or source of such power; and it had accordingly been recognized in several cases that notes or bonds given by municipalities for money borrowed were valid municipal obligations.13 And it is still generally, if not universally, conceded that a municipal corporation, under express authority or authority clearly implied, may incur indebtedness by borrowing money for municipal purposes.1 But upon recent challenge it has been declared in the Supreme

12 Black, Law Dict. tit. "Municipal Eonds."

13 City of Quincy v. Warfield, 25 Ill. 317, 79 Am. Dec. 330; De Voss v. Richmond, 18 Grat. (Va.) 338, 98 Am. Dec. 647, and note; BANK OF CHILLICOTHE v. CHILLICOTHE, 7 Ohio, 31, pt. 2, 30 Am. Dec. 185; MILLS v. GLEASON, 11 Wis. 470, 78 Am. Dec. 721. 14 City of Tyler v. L. L. Jester & Co. (Tex. Civ. App.) 74 S. W. 359; 1 Dill. Mun. Corp. §§ 117-120, and notes.