or other valuable property subject to a mortgage, the amount secured by the mortgage is indebtedness of the city, even if it do not assume it, or become liable for it in any way. In order to keep the property purchased the city will have to pay the mortgage, and, if the amount due thereon exceeds the limit of the debt which the city is authorized to incur, the purchase is beyond its power and void. But where no mortgage or other lien on the city's property was created, but under express legislative authority the city borrowed money to complete its water works, agreeing and stipulating that the loan should be paid solely out of a special fund created by the receipts from the water works, without any liability against the city or against the general funds of the city, the court held that no indebtedness was created within the meaning of the constitutional provisions. And where the city purchased lands, paying a part of the price, under a contract which stipulated that the city should not be liable for the price in any corporate capacity, but gave the vendor a lien on the property sold for the balance of the price, which might the date when the street railway property should come into the possession of any person as the result of foreclosure proceedings. The court held that the proposed issue constituted indebtedness of the city, and was forbidden by the Constitution. In reaching this conclusion it declared that the transaction was not a mere pledge of the property (and the income therefrom) which was to be purchased with the proceeds of the certificates; that the streets were the property of the city; that the grant of a franchise therein to secure the mortgage was a pledging of property owned by the city outside of that to be acquired by the use of the certificates; and that, under the principles laid down in the earlier decisions of the same court, the transaction could not be treated as creating obligations payable only out of a special fund. In Reynolds v. Waterville, 92 Me. 292, the city for the purpose of constructing a city hall, at a time when its indebtedness exceeded the constitutional limit, conveyed the site and the buildings then erected to a commission created by statute, which pursuant to the statute proceeded to contract for a new building. The commission was authorized to issue bonds to pay the cost, secured by the conveyance to it of the site and buildings upon which they constituted a first lien. The city was authorized to raise annually by taxation the money necessary for the main tenance of the building and the annual interest on the bonds. The city thereupon was to become the tenant of the building, and provision was made for a sinking fund to pay the bonds. It was held that the transaction was merely a borrowing of money upon the security of city property through the intervention of a trustee, and that it was void because it created indebtedness on the part of the city in violation of the constitutional provision. See infra, §§ 200, 294. 1 Fidelity Tr. & Guar. Co. v. Fowler Water Co., 113 Fed. Rep. 560; Voss v. Waterloo Water Co., 163 Ind. 69; Eddy Valve Co. v. Crown Point, 166 Ind. 613; Browne v. Boston, 179 Mass. 321; Ironwood Waterworks Co. v. Ironwood, 99 Mich. 454; Earles v. Wells, 94 Wis. 285. See also Painter v. Norfolk, 62 Neb. 330. 2 Winston v. Spokane, 12 Wash. 524. This case is distinguished in Joliet v. Alexander, 194 Ill. 457, as differing from the case of a mortgage or lien on city property, in that the only obligation assumed by the city of Spokane was the performance of a duty in the creation and management of the special fund, without any further liability on the city or its property. There was no obligation or duty on Spokane to exercise the power of taxation to pay the money thus borrowed. See also East Moline v. Pope, 224 Ill. 386; Lobdell v. Chicago, 227 Ill. 218. be foreclosed for a default in the payment of the balance, no indebtedness was created within the meaning of the Constitution.' -- $ 200. Contracts to purchase at the Option of the City. - A debt implies a right on the part of a creditor to enforce or require payment. Hence, if the municipality is not under an obligation to pay from its funds, taxes, or property, there can be no indebtedness, and a contract or ordinance by which the municipality stipulates for an option to purchase property on specified terms as it may find it prudent or advantageous for it to do so or not, does not create any indebtedness. It may decline to buy when the proper time comes, and until it determines to buy, no obligation or debt is assumed by it. On similar principles, a city may contract for land Perrigo v. Milwaukee, 92 Wis. 236; Milwaukee v. Milwaukee County, 95 Wis. 424; Burnham v. Milwaukee, 98 Wis. 128; Connor v. Marshfield, 128 Wis. 280. See also Kelly v. Minneapolis, 63 Minn. 125. In Swanson v. City of Ottumwa, 118 Iowa, 161, it was held that if the mortgage made by the city is essentially a purchase money mortgage and covers no property already owned by the city, and does not involve the city in liability to lose any property or any income owned or held by it at the time of the execution of the mortgage, and if the recourse of the mortgagor is limited to the property mortgaged without any liability on the part of the city, the mortgage does not necessarily imply a debt on the part of the mortgagor, and does not violate the constitutional limitation, although the city is already indebted to its limit. But in Ottumwa v. City Water Supply Co., 119 Fed. Rep. 315, the Federal Circuit Court of Appeals expressed an opposite view with reference to the same mortgage, and declared that a mortgage which is to be discharged by the payment of a money secures an indebtedness and cannot exist without the existence of a debt, even if the creditor's remedy is limited by the contract to the property of the debtor, which is covered by the mortgage. s. c. ante, § 198. 2 An ordinance authorizing the erection of water works by a private company, with the provision that the city may, at its option, purchase them, in the future on stated terms, does not create indebtedness. Fidelity Tr. & Guar. Co. v. Fowler Water Co., 113 Fed. Rep. 560; Centerville v. Fidelity Tr. & Guar. Co., 118 Fed. Rep. 332; Burlington Water Co. v. Woodward, 49 Iowa, 58; Stedman v. Berlin, 97 Wis. 505. See also Doland v. Clark, 143 Cal. 176 (telegraph system). A city, by ordinance duly accepted, entered into a contract with one Oliver by which he agreed to erect a suitable building for a city hall at a cost not exceeding $75,000, upon a lot owned by the city. The building when completed was to be leased to the city for twelve years, with a right of renewal, at an annual rental of $7,200, which the city agreed to pay annually. Oliver gave, and the city reserved an option to purchase the building at any tíme during the term, or at its expiration. Held, that the option so reserved did not create indebtedness. South Bend v. Reynolds, 155 Ind. 70. But see Reynolds v. Waterville, 92 Me. 292; referred to supra, § 199. When it appeared that a city proposed to enter into a contract for the purchase of boilers with which to operate its existing electric light plant, agreeing by resolution or ordinance that an appropriation shall be made therefor at a future date, and that the boilers should not be paid for until the appropriation should be made and warrants drawn on the special fund, and that no agreement or contract for the purchase of the boilers would be made whereby the seller would ask or receive of the city any warrants or money for said boilers until the appropriation is made by the city to meet the same, and that the city would in no way obligate itself to pay for said boilers until the appropriation is made and warrants issued on said appropriation, it was held that such a proceeding would not create a debt within the meaning of the constitu for a public purpose, and pay part of the price, reserving the right or option to cease paying at any time and to take title to such of the property as it has paid for, without creating debt within the meaning of the constitutional limitation. A contract for the purchase of land by a city, which provides that the city should be entitled to possession on making the first payment, and to a conveyance on payment within ten years of the balance of the purchase price with interest; that in the meantime the city should pay all taxes on the land; that upon default in any payment of purchase money, interest, or taxes, the vendors might foreclose the rights of the city in the land; and that there should be no corporate liability against the city in any manner or form by reason of the contract, has also been held to be in the nature of an optional right to the city, and to create no indebtedness.2 § 201 (137). Liability ex delicto. The language of the Constitution imposing a limit upon the power of a municipality to incur indebtedness deals with indebtedness that is reasonably anticipated as a result of voluntary action by the legislature or municipal authorities, such indebtedness as springs from express or implied contracts. Involuntary liability arising ex delicto is a subject that is not within the contemplation of these provisions. Accordingly, it has been held that if a municipality is sued for damages for a tort, such as personal injuries sustained through its negligence in maintaining its streets, the constitutional limitation and the fact that the municipality has already reached its limit of indebtedness cannot be interposed as a defence.3 Upon similar principles, if a tax is illegally tional limitation of indebtedness. Bai- 2 Burnham v. Milwaukee, 98 Wis. ley v. Sioux Falls, 19 S. Dak. 231; 103 N. W. Rep. 16. Windsor v. Des Moines, 110 Iowa, 175. See supra, § 198. In Klamath Falls v. Sachs, 35 Oreg. 325, the power of the municipality to contract indebtedness for water was limited to $10,000. It made an agreement whereby the contractor was to erect water works, receiving in part payment therefor the sum of $10,000. It was given an interest in the property commensurate with this payment, and the municipality had the right to acquire the property at specified periods upon paying a price estimated upon the rate yielded by the net annual income. It was held that this agreement did not violate the statutory limitation of indebtedness, the right to purchase the water works being only optional to the municipality. 128. See also Perrigo v. Milwaukee, 92 Wis. 236; Milwaukee v. Milwaukee County, 95 Wis. 424. See also Connor v. Marshfield, 128 Wis. 280. A purchase of real estate by a city on a credit of ten years is not a loan within the meaning of a statute regulating the manner in which money may be borrowed, and limiting the amount. Richmond v. McGirr, 78 Ind. 192. 3 People v. May, 9 Colo. 404; Bloomington v. Perdue, 99 Ill. 329; Chicago v. Sexton, 115 Ill. 230; Chicago v. Norton Milling Co., 97 Ill. App. 651; aff'd 196 Ill. 580; Bartle v. Des Moines, 38 Iowa, 414; Rice v. Des Moines, 40 Iowa, 638; Connor v. Nevada, 188 Mo. 148; McAleer v. Angell, 19 R. I. 688; Lorence v. Bean, 18 Wash. 36. A restrictive provision in a charter that the "council shall not cre exacted by a city and paid by the property owner under protest, at a time when the city's indebtedness exceeds the constitutional limit, the debt thereupon arising on the part of the city to the property owner is not within the operation of the constitutional limitation, and the amount paid may be recovered. So, too, a liability of a city arising from its failure to discharge a duty which it could constitutionally discharge, and growing out of a particular relation between the parties, such as failure or neglect to levy and collect a valid assessment against abutting property owners within a reasonable time does not come within the operation of the constitutional limitation. So, too, if a city wrongfully appropriates land without first paying therefor, the damages for which it is liable are an obligation arising from tort and not from contract, and do not fall within the operation of the constitutional provisions, which require the municipal authorities at the time of creating a debt to levy and collect a tax to pay interest and provide a sinking fund. But the Supreme Court of Pennsyl ate or permit to accrue any debts or liabilities which shall exceed" a specified sum, unless a certain course be pursued by the council and approved by a vote of the people, has been considered to have no relation to liabilities arising ex delicto, or to those which the law may cast upon the corporation, and to apply at most only to contracts or liabilities voluntarily created. The court, indeed, seemed to consider this provision as directory simply and not as a limitation on the power of the council to create indebtedness. McCracken v. San Francisco, 16 Cal. 591. 1 Thomas v. Burlington, 69 Iowa, 140; Phelps v. Tacoma, 15 Wash. 367. See also Richards v. Klickitat County, 13 Wash. 509. In Thomas v. Burlington, 69 Iowa, 140, the court said: "In the present case, the city did an act it had no right to do, and by wrongful action received or seized money, the property of the plaintiff. It did not become the money of the city by such wrongful seizure or enforced payment. The money belongs to the plaintiff now as fully as it did prior to the payment. The plaintiff is seeking to recover his own property which is held by the city for his use. There cannot be a debt or debtor unless there is a creditor; and while in a certain sense the plaintiff may be regarded as the creditor of the city, we do not think he is such in contemplation of the Constitution. He is not a voluntary, but an involuntary, creditor. He became such by compul sion. The Constitution provides that the city cannot become indebted in any manner. This implies an assent on the part of the creditor, and thus it is that the prohibited indebtedness is incurred; that is, it is created by the voluntary act of both parties." A sum which has been paid to a city as a paving assessment according to the front foot rule, and which is authorized by the legislature to be refunded, is not a debt within the meaning of the Constitution, as it does not grow out of any contract between the parties, but originated from the collection of an assessment made by the city upon the property of the persons to whom it was to be returned, and which for good reason the city is authorized by the State to return. Houston v. Stewart, 99 Tex. 67; 87 S. W. Rep. 663 (where a street assessment on the front foot rule was abandoned, and the plan of improving the streets by taxation adopted). 2 Denny v. Spokane, 79 Fed. Rep. 719; Mankato v. Barber Asphalt Paving Co., 142 Fed. Rep. 329; Ft. Dodge Electric, &c. Co. v. Ft. Dodge, 115 Iowa, 568; Little v. Portland, 26 Oreg. 235. See supra, § 198. A debt arising from a breach of contract, such as a default in making a cash payment at the time the city ought to have made it, the cash sufficient for the purpose being then in the city's treasury, is not within the constitutional limitation. Conyers v. Kirk, 78 Ga. 480. See supra, § 197. Dallas v. Miller, 7 Tex. Civ. App. vania has declared that the taking or injury to land by eminent domain is not a tort in the sense of a wrongful act, and therefore should be included within the operation of the constitutional provision; but it is to be observed that in the case where this decision was rendered, the suit was in equity to restrain the threatened performance of a contract for a public improvement whereby a city (which was indebted to the constitutional limit) contracted for the building of a viaduct without expense to it, but which would make it liable for damages to the owners of abutting land. The act which was called a tort was to be done under contract, and the assumption of the consequent damages was an express term of the contract, and the court declared that it was a perfectly clear case, and outside of the principle that makes municipalities liable for their wrongful acts without regard to their indebtedness.1 § 202. Funding and Refunding Operations. The provision of the Constitution is that no municipality shall be allowed to incur any debt which shall exceed the constitutional limit. It is obviously directed against those operations which result in the creation of indebtedness on the part of a municipality and not against transactions which relate merely to the form of the obligation or the nature or character of the evidences of indebtedness. If, therefore, a municipal corporation has already issued bonds, warrants, certificates, or other evidences of indebtedness, which were valid when issued, or if it has incurred valid floating debt for current or other expenses, or if it is indebted on a valid judgment, the municipality may under statute authority, as a general rule, fund or refund such indebtedness by the issue of its bonds without incurring indebtedness within the meaning of the constitutional provisions. These funding or refunding bonds, issued for a valid pre-existing indebtedness, neither create debt nor increase the debt of the municipality which issues them. They merely change the form and terms of payment of an existing indebtedness. If they are issued for a valid indebtedness, the fact that the 503. The awarding of damages to land owners for laying out a new road which by statute are payable out of a special assessment, is not the creation of a debt within the meaning of the constitutional limitation, when the title to the lands does not pass until payment. Com'rs of Highways v. Jackson, 165 Ill. 17. See also State v. Superior Ct. of Whatcom County, 42 Wash. 521. 2 Keller v. Scranton, 200 Pa. 130. Lake County Com'rs v. Platt, 79 Fed. Rep. 567, 569; Rollins v. Gun nison County Com'rs, 80 Fed. Rep. 692, |