Summary
In Bennett v. Petroleum County, 87 Mont. 436, 447, 288 P. 1018, a taxpayer brought suit to enjoin the county commissioners of Petroleum County from leasing a building to be used as a courthouse for a period of four years with an option to renew the lease for an additional four year period.
Summary of this case from Yovetich v. McClintockOpinion
No. 6,636.
Submitted May 6, 1930.
Decided May 24, 1930.
Injunction — Counties — Incurring Indebtedness in Excess of $10,000 Without Approval of Electors — Constitution — Leasing Private Property for County Purposes — Power and Discretion of Board of Commissioners — Validity of Contracts not Affected by Expiration of Terms of Office of Commissioners — Options. Counties — Incurring Indebtedness — Constitution — Limitation of $10,000 Without Approval of Electors — What Constitutes "Single Purpose." 1. To constitute a "single purpose" within the meaning of section 5, Article XIII, Constitution, declaring that no county shall incur any indebtedness for any single purpose in excess of $10,000 without the approval of a majority of the electors thereof, the elements which enter into it must be so related that, when combined, they constitute an entity, — something complete in itself but separate and apart from other objects. Same — Power of Commissioners to Provide Necessary County Buildings — Construction of Statute. 2. Held, that the provision of subdivisions 7 and 8, section 4465, Revised Codes 1921, as amended by Chapter 38, Laws of 1929, granting power to the board of county commissioners to provide suitable rooms "when there are no necessary county buildings" refers to a present proprietorship of such buildings by a county and not to property temporarily held and used under lease for county purposes. Same — Matter of Leasing Privately Owned Property for County Purposes Addressed to Discretion of Board of Commissioners. 3. The matter of leasing privately owned property under power granted the board of county commissioners by subdivision 7 of the above section, is one addressed to the sound judgment and discretion of the board. Option Contracts — Definition. 4. An option to purchase real property is simply a right conferred by contract whereby its owner agrees with another person that the latter shall have the right to purchase it at a fixed price within a definite time on terms stated; it is unilateral in the sense that while the optionee may compel specific performance, the optionor has no such right. Counties — Leasing Building for Courthouse Purposes — Four-year Contract Held not Illegal as Calling for Expenditure in Excess of Constitutional Limitation of $10,000 — Option to Purchase not Part of Lease. 5. The board of commissioners of a county having no courthouse, entered into a contract of lease with the owner of a building, the term of the lease being four years at a rental of $2,400 per annum, with the privilege in the county of renewal for a like period. The lease contained an option giving the county the right to purchase during the existence of the contract at the price of $31,000. Held, in an action to enjoin the carrying out of the contract, that the lease portion thereof calling for an expenditure of only $9,600 during a period of four years did not come within the constitutional prohibition referred to in paragraph 1 above; that the option portion, separate and apart from that relating to the lease, did not bind the county (see par. 4) and was presumably entered into with the understanding that before the option could be exercised the question would have to be submitted to a vote of the electors, and that therefore the court erred in granting the writ. Same — Validity of Contract not Affected by Expiration of Term of Office of Member of Board of Commissioners Before Term of Contract Expires. 6. The board of county commissioners functions for the county as a continuous body while the personnel of its membership changes, the public corporation — the county — continues unchanged, and its contracts are the contracts of the board, not of its individual members; hence the fact that the term of office of a member of the board which enters into a contract for the county may expire before the term of the contract, does not in any manner affect its validity.
Counties, 15 C.J., sec. 92, p. 448, n. 2; sec. 232, p. 540, n. 85, 91; sec. 234, p. 542, n. 2; sec. 281, p. 580, n. 18, 20. Landlord and Tenant, 35 C.J., sec. 182, p. 1038, n. 58. Specific Performance, 36 Cyc., p. 625, n. 27.
Appeal from District Court of Petroleum County; John C. Huntoon, Judge.
Messrs. Ayers Ayers and Mr. Nick Langshausen, for Appellants, submitted a brief; Mr. Roy E. Ayers argued the cause orally.
Mr. Ralph J. Anderson, for Respondent, submitted a brief and argued the cause orally.
The complaint attacks the lease in question on three grounds: first, liability in excess of constitutional limitation of $10,000 for acquiring lands; second, that the lease binds the county past the term of office of a majority of the present board; and third, that there are other available quarters for courthouse purposes at less rental.
Constitutional prohibition: The lease binds the county in the sum of $9,600 for rent and for nothing else, — a single purpose, rental. Every other condition of the lease is optional with the county and does not in any way bind it, and in no way does the county assume any obligation other than the payment of rental for four years, totaling $9,600.
The legislature has expressly authorized county commissioners to provide necessary county buildings and to do so by lease (sec. 4465, subds. 7 and 8, Rev. Codes 1921, as amended by Chap. 38, Laws of 1929), and there is no limitation prescribed upon such lease, such as we find on other matters affecting powers of county commissioners; for instance, the county printing contract, which cannot run for more than two years. While the legislature could have limited the powers of the board as to rooms, buildings and leases, it did not do so. ( Picket Pub. Co. v. Board of County Commrs., 36 Mont. 188, 122 Am. St. Rep. 352, 12 Ann. Cas. 986, 13 L.R.A. (n.s.) 1115, 92 P. 524; Board of County Commrs. v. Shields, 130 Ind. 6, 29 N.E. 385; Webb v. Spokane County, 9 Wn. 103, 37 P. 282; Liggett v. Board of County Commrs., 6 Colo. App. 269, 40 P. 475.)
Contract beyond term of existing board: In the case of Liggett v. Board, supra, the court said: "According to the board as it was then constituted, an immediate necessity may have existed to make it. The contract may have been one which would best subserve the county's interest. The board was in office; it had full authority to act with reference to all matters which legitimately came before it at that time; and in the absence of any proof showing fraud and collusion, or that the agreement must of necessity be so vitally injurious to public interest as to render it void as against public policy; the contract cannot be adjudged invalid because it was to be completed after the term of a majority of the board as it then existed." (See, also, Board of County Commrs. v. Shields, Webb v. Spokane County, supra; Dubuque Female College v. Dubuque, 13 Iowa, 555; Gale v. Kalamazoo, 23 Mich. 344, 9 Am. Rep. 80; Biddeford v. Yates, 104 Me. 506, 15 Ann. Cas. 1091, 72 A. 335; Tanner v. Town of Auburn, 37 Wn. 38, 79 P. 494; Pikes Peak Power Co. v. Colorado Springs, 105 Fed. 1, 44 C.C.A. 333; Westminster Water Co. v. Westminster, 98 Md. 551, 103 Am. St. Rep. 424, 64 L.R.A. 630, 56 A. 990; Illinois Trust Sav. Bank v. Arkansas City, 76 Eed. 271, 22 C.C.A. 171, 34 L.R.A. 518; Edward C. Jones Co. v. Guttenberg, 66 N.J.L. 659, 51 A. 274; Detroit v. Detroit Citizens' S.R. Co., 184 U.S. 368, 46 L.Ed. 592, 22 Sup. Ct. Rep. 410; Walla Walla v. Walla Walla Water Co., 172 U.S. 1, 43 L.Ed. 341, 19 Sup. Ct. Rep. 77; Omaha Water Co. v. Omaha, 147 Fed. 1, 8 Ann. Cas. 614, 12 L.R.A. (n.s.) 736, 77 C.C.A. 267.)
Other adequate available quarters: County commissioners in their business capacity are acting as executive and sometimes quasi-judicial officers and the courts will not interfere with them in the lawful exercise of the jurisdiction committed to them by law, solely upon the ground of lack of wisdom or sound discretion. ( Monroe County v. Strong, 78 Miss. 565, 29 So. 530; Platter v. Elkhart County; 103 Ind. 360, 2 N.E. 544; Grannis v. Blue Earth County Commrs., 81 Minn. 55, 83 N.W. 495; United States v. Ju Toy, 198 U.S. 253, 49 L.Ed. 1040, 25 Sup. Ct. Rep. 644; Bates Guild Co. v. Payne, 194 U.S. 106, 48 L.Ed. 894, 24 Sup. Ct. Rep. 595; State v. Forrest, 13 Wn. 268, 43 P. 51; State v. Rose, 140 Wis. 360, 28 L.R.A. (n.s.) 194, 122 N.W. 751; 46 C.J. 1033.) Abuse of discretion, bad faith and fraud on the part of an officer must be pleaded and proved. They are never imputed ( Liggett v. Board of County Commrs., 6 Colo. App. 269, 40 P. 475). The presumption of good faith, lack of abuse and lack of fraud are enough to defeat respondent's complaint. ( State v. Copeland, 96 Tenn. 296, 54 Am. St. Rep. 840, 31 L.R.A. 844, 34 S.W. 427.)
It is contended by appellants that by the terms of this agreement the county and the commissioners are not bound to expend in excess of $9,600, and that, therefore, the constitutional provision quoted above is not violated. However, this court has heretofore held that it is not necessary that there be an absolute liability to expend in excess of $10,000, for a single purpose, but that if it is proposed or planned to expend in excess of that amount for a single purpose that injunctive relief is proper. ( Hefferlin v. Chambers, 16 Mont. 349, 40 P. 787; Panchot v. Leet, 50 Mont. 314, 146 P. 927.)
It is the plan and purpose of the appellants in this case to expend something in excess of $31,000 in order to acquire a certain property as a courthouse and they have never as yet afforded the electors an opportunity of voting upon the proposition as required by the Constitution. The appellants are seeking to do indirectly what they cannot accomplish directly. Plans of similar character, as noted in the case from which we quoted, at length, have met with the express disapproval of this court in times past. If this plan, as set forth in the contract in question, is held to be without the provisions of our state Constitution quoted, then, any time a board of county commissioners desires to obviate the constitutional provision, the door is wide open, and the constitutional provision, which has heretofore been declared by this court to be both "mandatory" and "prohibitory," is rendered meaningless.
From the complaint it appears that admittedly this contract is entered into in excess of the term of the majority of the board, and coupled with this fact we find the allegations of the complaint establishing the fact that there is no immediate public necessity for entering into a contract for so long a period of time as it is alleged that adequate quarters are available for the use of the county for courthouse purposes; in fact, the very quarters which have been occupied for such purposes since the creation of the county. The general rule on this question, as stated in 15 C.J., at page 542, is as follows: "The general rule is that contracts extending beyond the term of the existing board and the employment of agents or servants of the county for such a period, thus tying the hands of the succeeding board and depriving the latter of their proper powers, are void as contrary to public policy, at least in the absence of a showing of necessity of good faith and public interest." The foregoing rule has been recognized and enforced in numerous cases, from other jurisdictions. ( Millikin v. Edgar County, 142 Ill. 528, 18 L.R.A. 447, 32 N.E. 493; Board of Commrs. v. Taylor, 123 Ind. 148, 7 L.R.A. 160, 23 N.E. 752; First Nat. Bank v. Peck, 43 Kan. 643, 23 P. 1077; Olmsted Gillelen v. Hesla, 24 Ariz. 546, 211 P. 589; Robson v. Smith, 50 Kan. 350, 32 P. 30, 31.) Many cases are called to the attention of the court in the brief of appellants which deal with contracts entered into by a governing board of a municipality for a period of time in excess of the term to which a majority of the members of the board have been elected. It will be noted that with few exceptions these contracts under consideration relate to the business affairs of the municipality as distinguished from the governmental affairs. We admit that the rule for which we contend does not apply to a case of a municipality entering into contracts with reference to waterworks or water supply or lighting plants or lights or any other enterprise in which a municipal corporation is engaged, which is a purely business enterprise and not a governmental matter. This court observed in the case of Sullivan v. Big Horn County, 66 Mont. 45, 212 P. 1105, that the latitude given to a municipality in the manner of exercising its powers is much greater than that given to a county, thereby recognizing the principle of law for which we contend. Cities engage in many enterprises which are of a business character in supplying to the community various comforts and conveniences for compensation. In other words, cities engage in business enterprises, whereas the function of a county is purely governmental. Therefore, cases such as are cited in appellant's brief dealing with other classes of municipal corporations other than counties are not worthy of consideration, as there is everywhere recognized a distinction between the powers of a city and the powers of a county in matters of the kind under discussion.
Appellants take the position that the respondent is insisting that the absence of necessity is likewise a ground for relief, but such is not our contention. The question of necessity is material in that if it were impossible for the county to secure quarters for the housing of its public officials, it would become highly important and might afford a justification for sustaining the lease for a period of four years. But the admitted facts are that other quarters are available at a more reasonable rental, being the identical quarters which the officers of the county have occupied since the creation thereof. Consequently, the contract under consideration is not one based upon necessity.
This action was instituted by the plaintiff, as a taxpayer, for the purpose of enjoining the board of county commissioners of Petroleum county from fulfilling the terms of a contract of lease executed by one Benjamin F. Leffer, as lessor, with the county of Petroleum, as lessee, by the terms whereof the lessor agreed to remodel and repair a certain building owned by him in the town of Winnett, the county seat of Petroleum county, and to expend in improvements and repairs not to exceed $14,000, and to lease such building and the ground upon which it is located to Petroleum county for courthouse purposes for a period of four years from and after December 31, 1929, for the agreed rental of $2,400 per calendar year, payable at the rate of $200 per month, with the privilege of renewal on the same terms for an additional four years' period; which contract also contained provision whereby the county was given an option to purchase the property during the existence of the lease at the agreed price of $31,000, plus taxes and insurance premiums paid on the property after August 1, 1929, and any amount of expenditure made by the lessor in remodeling or repairing the building in excess of $14,000, it being stipulated that all rents paid under the contract and the amount of the cost of remodeling the building less than the stipulated sum of $14,000 shall be credited and applied on the purchase price, in event of the county exercising option to purchase the property during the life of the agreement.
It is the plaintiff's contention that the contract is void because it authorizes an expenditure of county money "for a single purpose" in an amount exceeding $10,000, without having first submitted the question to a vote of the duly qualified electors, and thus obtaining sanction as a condition precedent for the proposed expenditure; that other suitable buildings are available for lease and have been used for like county purposes involving the expenditure of less money; and further that the contract is void by reason of the fact that by its terms it extends beyond the present term of office of individual members of the board of county commissioners. An order to show cause and temporary injunction was issued.
The defendants regularly appeared by general demurrer and at the same time moved the court to dissolve the temporary injunction. The demurrer was overruled and the motion denied. Appeal is prosecuted to this court from the order refusing to dissolve the temporary injunction.
The only question presented is whether the lease contract is valid.
The statute confers authority upon the board of county commissioners, under such limitations and restrictions as are prescribed by law, to provide suitable rooms for county purposes "when there are no necessary county buildings," and to "purchase, receive by donation or lease any real or personal property necessary for the use of the county." (Subds. 7 and 8, sec. 4465, Rev. Codes 1921, as amended by Chap. 38, Laws of 1929.) From the recitals contained in the lease contract it appears that the county is not possessed of necessary county buildings; accordingly, the contract is authorized and valid unless found objectionable under constitutional restrictions imposed or other regulatory statutes.
Our Constitution provides that "No county shall incur any [1] indebtedness or liability for any single purpose to an amount exceeding ten thousand dollars ($10,000) without the approval of a majority of the electors thereof, voting at an election to be provided by law." (Sec. 5, Art. XIII.) And like provision is contained in our statutes. (Sec. 4447, Rev. Codes 1921.) Consequently, there arises for our determination the question as to whether the lease contract involved is violative of these constitutional and statutory limitations. By the terms of the contract is it sought to obligate the county to liability for the payment of an indebtedness in excess of $10,000 for a "single purpose"? If so, the contract is invalid, since the proposed expenditure appears never to have been submitted to the electors at an election called or held for that purpose, or otherwise. ( Hefferlin v. Chambers, 16 Mont. 349, 40 P. 787; Hoffman v. Gallatin County Commrs., 18 Mont. 224, 44 P. 973; Jenkins v. Newman, 39 Mont. 77, 101 P. 625; Panchot v. Leet, 50 Mont. 314, 146 P. 927.) The words "single purpose" employed in the constitutional restriction have specific reference to "one object, project or proposition — a unit isolated from all others. In other words, to constitute a single purpose, the elements which enter into it must be so related that, when combined, they constitute an entity; something complete in itself, but separate and apart from other objects." ( State ex rel. Turner v. Patch, 64 Mont. 565, 210 P. 748.) Applying this definition, which meets with our approval, we hold that the lease contract in question is not violative of the constitutional and statutory limitations [2, 3] imposed. The board of county commissioners is clothed with authority to lease any real property necessary for county purposes "when there are no necessary county buildings." The words just quoted from the statute clearly have reference to a present proprietorship of such buildings by a county; and were not intended to refer to other like property temporarily held and used under lease from the owner for similar county purposes. The necessity for leasing the property in question was in our opinion addressed to the sound judgment and discretion of the board of county commissioners. As to whether the indebtedness contracted, i.e., rentals payable in monthly installments, created a present obligation of the county, need not be determined, since the aggregate amount to become due during the term of the contract is less than $10,000. By the terms of the lease the greatest amount of money required to be expended for the one object or purpose, and for which the county was definitely obligated, viz., rental of a building for use as a county courthouse, is the sum of $9,600, during a period of four years, payable in monthly installments at the rate of $200 per month.
However, it is argued that since the lease contained an option [4, 5] whereby the county was given the exclusive right and privilege during the existence of the contract, to purchase the property for the sum of $31,000, it is violative of the constitutional provision above set forth. There is no merit in this contention, since that phase of the contract is wholly unilateral and imposes no obligation on the county to buy the property. ( Clark v. American D. M. Co., 28 Mont. 468, 72 P. 978; Nielson v. Hendrickson, 63 Mont. 518, 210 P. 905.) Here the lease and option to purchase contained in the one instrument constitute separate agreements, their provisions being wholly independent. ( Merk v. Bowery Min. Co., 31 Mont. 298, 78 P. 519; Snider v. Yarbrough, 43 Mont. 203, 115 P. 411.) And the option to purchase at a price in excess of the sum of $10,000 does not invalidate the contract, since it was presumably entered into with reference to the provisions of the Constitution requiring a submission of the question to a vote of the electors before the county could lawfully exercise the option granted. The option bound the optionor but could only be exercised by the county by compliance with the constitutional requirements.
An option to purchase, such as is contained in the contract under consideration, is merely an agreement whereby the optionee may, upon compliance with certain terms and conditions, become the owner of the property. It is not bilateral in the sense that the optionor may compel specific performance, although such right is conferred on the optionee by virtue of a valid agreement. ( Nielson v. Hendrickson, supra.) It is simply "a right conferred by contract upon one party by another to accept or reject a present offer within a limited or reasonable time." ( Sunburst Oil Gas Co. v. Neville, 79 Mont. 550, 257 P. 1016, 1019.) It "is neither a lease nor a contract to lease. It is simply a contract whereby the owner of the property agrees with another person that he has the right to exercise certain privileges with reference to the property in question," in this case the right to purchase a certain building at a fixed price within a definite time on terms stated. ( Thomas v. Standard Dev. Co., 70 Mont. 156, 224 P. 870; Libby Lumber Co. v. Pacific States Fire Ins. Co., 79 Mont. 166, 60 A.L.R. 1, 255 P. 340; Snider v. Yarbrough, supra; Ide v. Leiser, 10 Mont. 5, 24 Am. St. Rep. 17, 24 P. 695.)
However, the respondent further contends that the contract is [6] void since it purports upon its face to extend the county's obligation beyond the term of office of members of the existing board of county commissioners when the contract was made. The statute authorizes the board of county commissioners as a legally constituted entity, acting for the county, among other things, to lease real property necessary for use of the county, and to provide suitable rooms for county purposes when there are no necessary county buildings. (Sec. 4465, Rev. Codes 1921, as amended by Chap. 38, Laws of 1929.) In this respect, there is no further limitation or restriction placed on the board, and no time limit fixed as to the term of any lease of such property. While the board of county commissioners, in dealing with county business, is possessed of only such authority as is especially conferred upon it by statute or necessarily implied ( State ex rel. Blair v. Kuhr, 86 Mont. 377, 283 P. 758), here the authority is expressly conferred to lease a building for county purposes when no such building is owned by the county, and is necessary. The statute specifically confers the power to so contract upon the board of county commissioners, the body existing at the time, and the mere fact that the term of office of a member of the body which so contracts may expire before the contract, does not in any manner affect its validity. Were the rule of law otherwise, the business of counties would be very greatly hampered and at times suspended, with resulting damage. The board of county commissioners functions for the municipal corporation in its authorized powers as a continuous body, and while the personnel of its membership changes, the corporation continues unchanged. The county has power to contract, and its contracts are the contracts of its board of county commissioners, not of the individual members thereof. ( Ligget v. Board of County Commrs., 6 Colo. App. 269, 40 P. 475; Board of County Commrs. v. Shields, 130 Ind. 6, 29 N.E. 385; Webb v. Spokane County, 9 Wn. 103, 37 P. 282; Picket Pub. Co. v. Board of County Commrs., 36 Mont. 188, 122 Am. St. Rep. 352, 12 Ann. Cas. 986, 13 L.R.A. (n.s.) 1115, 92 P. 524.)
The order is reversed and the cause is remanded to the district court of Petroleum county, with direction to dissolve the injunction.
MR. CHIEF JUSTICE CALLAWAY and ASSOCIATE JUSTICES MATTHEWS and FORD concur.
MR. JUSTICE ANGSTMAN, being absent, did not hear the argument and takes no part in the foregoing decision.