against creating the debt in any way, shape, or form whatever. If an obligation does, within the meaning of the Constitution, increase a municipality's indebtedness beyond the legal limit, it makes no difference whether it is expressly assumed, or is implied in fact, or is implied in law (quasicontract).
The Constitution of Pennsylvania, Article IX, Sec., 8, P.S., provides, "The debt of any county, city, borough, township, school district, or other municipality or incorporated district, except as provided herein, and in section fifteen of this article, shall never exceed seven (7) per centum upon the assessed value of the taxable property therein, * * *." It was agreed that the present Secretary of the Borough council, if called as a witness for the defendant, would testify that in the year 1927 the Borough could contract indebtedness up to the amount of $621,057.92, which amount is 7% of $8,872,256, the assessed valuation of the taxable property, and that the actual debt of the Borough in 1927, excluding any obligation which might arise in connection with these trucks, was $655,214.87.
Laying aside the question raised by the plaintiff as to whether the testimony of this official is competent to establish the facts stated, we may take up at once what appears to be the controlling point in the case.
It has been held in several decisions in Pennsylvania that obligations incurred for operating expenses payable out of current revenues, reasonably anticipated to be sufficient to cover them, do not diminish the borrowing power of the borough for the year then current. "When a contract made by a municipal corporation pertains to its ordinary expenses, and is, together with other like expenses, within the limit of its current revenues and such special taxes as it may legally and in good faith intend to levy therefor, such contract does not constitute 'increases of indebtedness' within the meaning of the constitutional provision limiting the power of municipal corporations to contract debts." Dillon, Municipal Corporations, Sec. 88. See Kelley v. Baldwin, 319 Pa. 53, 179 A. 736, and other cases. This is true of temporary loans made for the purpose, and is equally true of direct obligations incurred for services, rental of necessary equipment, etc.
The courts have also dealt with the objection that this rule opens the door to various subterfuges which might permit the municipality to d indirectly what it is forbidden to do directly. See Kreusler v. McKees Rocks School District, 256 Pa. 281, 100 A. 821; Pennsylvania Power & Light Co. v. Bethlehem, 323 Pa. 313, 185 A. 710. In Pittsburgh Paving Co. v. Pittsburgh, 332 Pa. 563, 3 A.2d 905, 912, the Court, in ascertaining the constitutional limit of a city's borrowing power, excluded temporary obligations of a similar character because the record indicated that the loans were made by the municipal officers with the bona fide intention to pay them out of current revenues sufficient for that purpose. There was no attempt to evade the law, and the outstanding uncollected taxes for the year were at all times in excess of the temporary borrowings.The Court said, "if such loans do not overreach current revenues and do not extend beyond the present means of payment possessed by the municipality, then no debt is created in a constitutional sense." Nor is it material to the question that the loans, as it turned out, were not actually paid out of current revenues, but some portions of them were carried over into succeeding years.
It may appear from some opinions that the intention of the Borough officers to evade the constitutional debt limitation is the test as to whether or not these temporary obligations are to be considered debts within the meaning of the Constitution. However, that can hardly be the question, because in many cases the obligation sought to be enforced is quasi-contractual. It is not voluntarily assumed, and hence, as a matter of fact, there is no real intention about it one way or the other. The question is discussed in Scranton Electric Co. v. Old Forge Borough, 309 Pa. 73, 163 A. 154, where the obligation to pay for electric light was sustained on a quasi-contractual theory, though in excess of the borough's borrowing power. Incidentally that case was one in which the current obligations had remained unpaid and had been carried over into subsequent years.It would seem therefore that the ultimate test must be the adequacy of the current revenues to take care of the fair value of the use of the property as a current expense.
In the present case the evidence submitted would establish a fair rental value for the trucks in excess of $300 per month which the plaintiff asks for. There can be no doubt that this charge would be well within the reasonably anticipated ability of the Borough to pay out of current revenues. There is no evidence to show that there was any conscious attempt on the part of the Borough officers or anyone else to evade the debt limitation by means of a scheme to make additional obligations appear as current expenses as there was in the Bethlehem case.
Cases (in all of which the present plaintiff was a party) dealing with similar situations in other states are American-LaFrance & Foamite Industries v. Arlington County, 169 Va. 7, 192 S.E. 758; American LaFrance & Foamite Industries v. Floydada, 15 F.Supp. 390, affirmed 5 Cir., 87 F.2d 820; American LaFrance v. Plattsburg, W. D. Missouri, April 2, 1937
; American-LaFrance, Inc. v. Philadelphia, 183 Miss. 207, 184 So. 620.
Judgment may be entered for the plaintiff in accordance with the foregoing opinion.
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