NOTES IN THIS VOLUME. Page Constitutional and Statutory Limitations of Municipal Indebtedness 6 Supplementary and Ancillary Proceedings and Relief in Federal Courts... 195 Probate Jurisdiction of Federal Courts... 276 Statutory Exemptions of Building and Loan Associations from the Operation of the Usury Laws.... 343 Jurisdiction of Circuit Courts as Determined by the Amount in Controversy..... 459 Supplementary to note to Auer v. Lombard, 19 C. C. A. 75. Laches as a Defense in Suits for Infringement of Patents, Copyrights, and Trade-Marks..... Supplementary to note to Taylor v. Spindle Co., 22 C. C. A. 211. 613 CASES ARGUED AND DETERMINED IN THE UNITED STATES CIRCUIT COURTS OF APPEALS. (94 Fed. 916.) CITY OF HELENA v. MILLS. (Circuit Court of Appeals, Ninth Circuit. May 2, 1899.) No. 510. MUNICIPAL CORPORATIONS · CONSTITUTIONAL LIMITATION OF INDEBTEDNESS CONTRACT FOR WATER SUPPLY. Under the constitution of Montana, which limits the indebtedness of municipal corporations, and provides that all obligations in excess of the amount so limited shall be void, a city not authorized by statute to levy and collect a special tax for water purposes, and which is already indebted beyond the constitutional limit, has no power to bind itself by a contract for a supply of water to be furnished for municipal purposes; and a claim accrued for water furnished under such a contract is within the constitutional prohibition, and cannot be enforced.1 In Error to the Circuit Court of the United States for the District of Montana. It is sought by the writ of error in this case to review a judgment rendered by the circuit court upon the pleadings in an action brought by the defendant in error to recover for water furnished to the city of Helena under a contract made in pursuance of an ordinance of the city approved by the mayor on August 17, 1897. The ordinance provided, among other things, that James H. Mills, as the receiver of the Helena Consolidated Water Company, should furnish "a full, ample, sufficient supply of good, pure, wholesome and clear water through said plant and system and the hydrants thereto connected, to the city of Helena for fire, sewerage and other municipal purposes, for a period of five years from the first day of August, A. D. 1897." The ordinance further provided that if, within 30 days after its passage, the receiver should file with the city clerk his acceptance of its terms, it should go into effect and operate as a contract between the parties. The receiver accepted the ordinance, and has since supplied the city with water. In May, 1898, the city refused to pay therefor. The complaint alleged these facts, and further stated that the water plant operated by the receiver is the only one in the city of Helena, and was the only one at the time of the passage of the ordinance; that no other person or corporation was able at the time when said ordinance was passed, or for a long time prior thereto, or at any time since, to furnish water to the city of Helena for the pur 1 See note at end of case. 36 C.C.A.-1 poses specified in the ordinance; that the city has since the passage of the ordinance levied and collected taxes sufficient to meet the amount provided for in the ordinance. The answer admitted all of said facts, but alleged that at the time when the contract was entered into, and at all times since, the city of Helena could have entered into a contract with responsible parties to supply it with water within six months from the making of such contract, and that within such period the city could have been supplied with water from sources other than those controlled by the defendant in error, and that the contract was entered into without advertising for bids, and that, had the city asked for bids, and offered to enter into a contract with the successful bidder to supply it with water within six months thereafter, responsible parties other than the defendant in error would have bid; that prior to the ordinance the receiver and the water company had for more than two years supplied the city with water without any express contract. The answer further alleged that the city is, and ever since the passage of said ordinance has been, indebted beyond the constitutional limit; that during none of such time has the assessed value of property in the city exceeded $12,656,783, nor the aggregate indebtedness been less than $559,704. A judgment was rendered upon the pleadings in favor of the plaintiff in the action. T. J. Walsh and Edward Horsky, for plaintiff in error. Before GILBERT and ROSS, Circuit Judges, and HAWLEY, District Judge. GILBERT, Circuit Judge, after stating the facts as above, delivered the opinion of the court. It is contended that the contract between the city of Helena and the receiver of the water company is void-First, because it was entered into without asking for bids, as required by section 4807 of the Political Code of Montana; and, second, because the city was indebted beyond the constitutional limit when the contract was made,and that, even if the contract is not void, the judgment could not lawfully be rendered against the city, because it was indebted beyond the constitutional limit at the time when the indebtedness became due. The constitution of Montana, which was in force when the contract was made, provides as follows (article 13, § 6): "No city, town, township or school district shall be allowed to become in. debted in any manner or for any purpose to an amount, including existing indebtedness, in the aggregate exceeding three per centum of the value of the taxable property therein, to be ascertained by the last assessment for the state and county taxes previous to the incurring of such indebtedness, and all bonds or obligations in excess of such amount given by or on behalf of such city, town, township or school district shall be void." From the pleadings it appears that at the time of making the contract, and ever since, the actual indebtedness exceeded $559,000, whereas the permitted indebtedness was no more than $379,703.49. Did the amount due, and for which judgment was recovered, consti tute an indebtedness against the city, within the meaning of that term as it is used in the constitution? The question has heretofore been twice presented to the supreme court of Montana. The case of Davenport v. Kleinschmidt, 6 Mont. 502, 13 Pac. 249, involved the validity of a contract for a water supply made by the city of Helena. The charter of the city at that time prescribed "that said city shall not be authorized to incur any indebtedness on behalf of said city for any purpose whatever to exceed the sum of $20,000." At the time of making the contract the bonded indebtedness of the city was $19,500, and its floating debt, consisting of outstanding warrants, was $15,000. The court held that no further indebtedness could be incurred until some of the outstanding debt had been discharged. In reaching that conclusion the court considered the nature of the obligation incurred by the city for its annual supply of water, and held that it was an indebtedness, within the meaning of the provision of the charter. It distinguished that case from cases in which a special provision had been made for levying a special tax to meet water rental, as in the case of Water Co. v. Woodward, 49 Iowa, 61, and said: "In all of the water cases arising in the state of Iowa, we are met with the general statute which authorizes all cities to contract for the erection of waterworks, and to pay for the water used by a special fund raised by a special annual tax not to exceed five mills on the dollar. Such contracts with water companies were held not to create a debt against the cities, because the water companies could never have any general claim against cities, but were held to look to the special fund alone." After the decision was rendered in that case an act was passed by the legislature of Montana providing for the levy of a special tax of 14 per cent. upon the assessable property to create a special fund for the payment of bills for fire and water. While that statute was in force, and while Montana was still a territory, the city of Great Falls entered into a contract for the supply of water; and in the case of State v. City of Great Falls, 19 Mont. 518, 49 Pac. 15, the question arose whether the liability so incurred was an indebtedness, within the meaning of the act of congress limiting the indebtedness of municipal corporations in the territories. The act of congress provided as follows: "That no political or municipal corporation, county, or other subdivision in any of the territories of the United States, shall ever become indebted in any manner or for any purpose to any amount in the aggregate, including existing indebtedness, exceeding four per centum on the value of the taxable property within such corporation, county, or subdivision, to be ascertained by the last assessment for territorial and county taxes previous to the incurring of such indebtedness." 24 Stat. 171. The court said: "The contract was entered into in contemplation of a special fund being created by the city to meet liabilities incurred thereunder, and the legislature, in said act, contemplated at the time that cities of the territory should pay for water used by them for sewerage and fire purposes from taxes levied and collected for that specific purpose. The case of Davenport v. Kleinschmidt, supra, does not disapprove the Iowa cases, holding that, because a general law provided for payment from a special fund, a liability incurred by a city to supply its inhabitants with water was not a debt, in the sense of the term as employed in the constitution of Iowa. It follows from this view of the case that neither under the organic act of the territory of Montana nor the constitution of the state of Montana is or was the liability incurred by the city of Great Falls under Ordinance 17 a debt, in the sense prohibited." a * But when the Montana Codes were adopted, in the year 1895, the statute which controlled the decision in the Great Falls Case was repealed. There was no longer a statute creating a special fund for the payment of water rentals. The conditions again existed under which the ruling had been made in Davenport v. Klein |