This section is from the book "The Law Of Contracts", by William Herbert Page. Also available from Amazon: Commercial Contracts: A Practical Guide to Deals, Contracts, Agreements and Promises.
The general view taken of such statutory provisions is that they apply to all forms of indebtedness, no matter how incurred or what is received therefor. Thus such limitation applies to debts incurred in the purchase of property,1 even if such property is necessary for the management of the public corporation,2 such as a water supply3 or electric lights.4 So where the limit of debt is exceeded a contract for 7,000 lamps "more or less" is invalid.5 These provisions apply to debts incurred in carrying out powers conferred on the municipality by statute.6 Thus where no debt can be created in excess of income there is no implied liability resting on a county for burying indigent dead after the limit of indebtedness has been reached, though omission of burial is a misdemeanor.7 Such limitation applie8 to obligations imposed by statute as well as to those created by express contract.8
City of Camden, 49 S. C. 78; 26 S. E. 984.
12 City of Kansas City v. Gas Co., 9 Kan. App. 325; 61 Pac. 317; Cass County v. Wilbarger County, 25 Tex. Civ. App. 52; 60 S. W. 988.
13 State Savings Bank v. Davis, 22 Wash. 406; 61 Pac. 43.
14 New York, etc., Co. v. Tacoma, 21 Wash. 303; 57 Pac. 810.
2 Chicago v. McDonald, 176 111. 404; 52 N. E. 982; Laporte v. Gamewell, etc., Co., 146 Ind. 466; 58 Am. St. Rep. 359; 35 L. P. A. 686; 45 N. E. 588; Windsor v. Des Moines, 110 Ia. 175; 80 Am. St. Rep. 280; 81 N. W. 476; Grand Island, etc., R. R. Co. v. Baker, 6 Wyom. 369; 71 Am. St. Rep. 926; 34 L. R. A. 835; 45 Pac. 494.
3 State v. Helena, 24 Mont. 521; 81 Am. St. Rep. 453; 55 L. R. A. 336; 63 Pac. 99.
4 Windsor v. Des Moines, 110 Ia. 175; 80 Am. St. Rep. 280; 81 N. W. 476 (even if the contract price was no greater than had been paid).
5 City of Chicago v. Galpin, 183 111. 399; 55 N. E. 731 (citing Lake County v. Rollins, 130 U. S. 662; Thompson-Houston Electric Co. v. Newton, 42 Fed. 723; City of Chicago v. McDonald, 176 111. 404; 52 N. E. 982; Beard v. Hopkinsville, 95 Ky. 239; 44 Am. St. Rep. 222; 23 L. R. A. 402; 24 S. W. 872; overruling City of East St. Louis v. Coke Co., 98 111. 415; 38 Am. Rep. 97; City of Carlyle v. Power Co., 140 111. 445; 29 N. E. 556).
6 Lake County v. Rollins, 130 U. S. 662.
According to the foregoing cases the fact that the debt in question is incurred in the necessary and legitimate exercise of the corporation does not make the case an exception to the plain provisions of the statute.9 The authorities are not unanimous upon this point, however. In some jurisdictions the provision* limiting indebtedness are held not to apply to certain forms of indebtedness which are required by mandatory constitutional provisions.10 Thus, even where the limit of indebtedness has been reached it has been held that a county is liable for the fees of jurors,11 or for the expense of keeping its prisoners in the jail of another county12 and that a city is liable on warrants issued for the salaries of its policemen, marshal and treasurer ;13 or for expenses of printing ballots, quarantining, impounding stock and insuring city buildings.1* Even where there is a limitation of debts to a certain per cent of the assessed value a new county may borrow money for necessary running expenses before the first assessment.15
The limitation of the statute cannot be evaded by having the purchase assume the form of a lease, the rental to pay the purchase price,16 nor by deferring the payment of the purchase price,17 nor by dividing a debt into installments, each within the limit.18 So where the limit is reached a city cannot buy property encumbered with liens though it assumes no liability.19 So a mortgage on land purchased by a city was counted as a debt, the city taking subject thereto, though not promising to pay such debt; since without paying it, the city cannot keep the land.20
7 Pacific Undertakers v. Widber, 113 Cal. 201; 45 Pac. 273.
8 Grand Island, etc., R. R. Co. v. Baker, 6 Wyom. 369; 71 Am. St. Rep. 926; 34 L. R. A. 835; 45 Pac. 494.
9 Chicago v. McDonald, 176 111. 404; 52 N. E. 982; Prince v. Quincy, 105 111. 138; 44 Am. Rep. 785; Law v. People, 87 111. 385; Sackett v. New Albany, 88 Ind. 473; 45 Am. Rep. 467.
10 Ranch v. Chapman, 16 Wash. 568; 58 Am. St. Rep. 52; 36 L. R. A. 407; 48 Pac. 253.
11 Ranch v. Chapman, 16 Wash. 568; 58 Am. St. Rep. 52; 36 L. R. A. 407: 48 Pac 253.
12 Potter v. Douglass County, 87 Mo. 239.
13 Hull v. Ames, 26 Wash. 272; 66 Pac. 391.
14 Gladwin v. Ames, 30 Wash. 608; 71 Pac. 189.
15 Hall, etc., Co. v. Board, etc., of Roger Mills County, 8 Okla. 378; 58 Pac. 620; Board, etc., of Roger Mills County v. Rowden, 8 Okla. 406; 58 Pac. 624; Same v. Sauer, 8 Okla. 409; 58 Pac. 625.
16 Hall v. Cedar Rapids, 115 Ia. 199; 88 N. W. 448; Earles v. Wells, 94 Wis. 285; 59 Am. St. Rep. 886; 68 N. W. 964.
A contract for rentals for hydrants is usually considered as creating a debt when each installment becomes due.21 If such contract does not exceed the limit when made, but exceeds the limit when due, it is invalid.22 A contract which gives an official power to order unlimited extras is invalid.23