taken by the court that the power to borrow money and issue securities therefor is not necessary to a municipal corporation and cannot be implied from its usual franchises and powers. The court pointed out that business corporations, unless restrained by their charters, possess the power to borrow money and issue securities therefor. Generally, they could not carry on their authorized and legitimate business without such power, and hence it must be presumed that the legislature intended that they should possess it. But towns and other municipal corporations are organized for governmental purposes, and their powers are limited and defined by the statutes under which they are constituted. They possess only such powers as are expressly conferred or necessarily implied; they are clothed with the power of taxation, and thus can raise all the money needed for ordinary municipal purposes, and until the money can thus be raised, as it can be at brief intervals, experience has demonstrated their ability to obtain upon credit all the materials and services needed without a resort to loans of money upon credit. The court declared that "It is the general, if not the universal, law of this country, and of England, that municipalities are not empowered to borrow money for municipal purposes, unless expressly authorized to do so by statute, or in the absence of a statute, unless the power is necessarily implied from some special duty imposed, for the discharge of which the power to borrow money is not only convenient, but necessary. 99 1 When the purpose is such as pertains to the ordinary matters and affairs of municipalities, authority "to raise" money therefor does not mean authority to borrow, but authority to raise it by taxation. It has been said that the power to raise money for municipal purposes never means a power to borrow, unless there is other language qualifying or extending its meaning. But in later cases the court seems to incline to the view that the term "to raise" money for the purposes of a municipal corporation has no fixed or definite meaning, and that it is to be construed with reference to the nature of the purpose for which it is intended to raise money.

1 Wells v. Salina, 119 N. Y. 280. 2 In Wells v. Salina, 119 N. Y. 280, the town was authorized by statute "to direct the institution or defence of suits at law or in equity, in all controversies between such town and corporations, individuals or other towns," and "to direct such sum to be raised in such town for prosecuting or defending such suits as they may deem necessary." At a town meeting a resolution was passed requiring the supervisor to

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borrow a sum of money for the payment of expenses already incurred in litigation, and for the purpose of defending the town in any action or suit which might be brought against it on certain railroad aid bonds. It was held that the power "to raise" money for the purpose of prosecuting or defending suits simply implied a power to raise the money by taxation, and not by borrowing.

Thus it has been said that to raise money in its ordinary import is simply to procure it. When applied to an individual or a business corporation, it means the procuring of money in any of the usual methods, by note, mortgage, or other obligation. As applied to municipal corporations its ordinary import is the procuring of money by taxation or by the obligations of the corporation. The usual method of a municipal corporation for raising money for ordinary purposes is by taxation; for extraordinary purposes by its obligations, generally in the form of bonds. Where a statute expressly authorizes the borrowing of money, the words "to raise" money are equally apt to signify raising by taxation or by municipal obligations. This is the commonly accepted significance of the words and also their legal significance, except where used in a statute in which it appears that they were intended to be used in a more restricted sense. Hence, when a municipal corporation has express authority to borrow money for special purposes a vote of the municipality "to raise the money" for that purpose is broad enough to authorize the issue of bonds on the credit of the municipality under the statutory authority to borrow.1

§ 287. Implied Power to borrow; Rule in Michigan, Illinois, and other States. The tendency of recent decisions in the courts of different States is to deny to municipal corporations of all classes any general inherent or general implied power to raise money for corporate purposes, at least for ordinary corporate purposes, by borrowing. Thus, in Michigan, it was contended that the power to incur indebtedness necessarily implies the power to borrow money and to issue evidences of indebtedness therefor payable in the future. The court, however, pointed out that the general rule is that in order to imply the existence of a power it must be essential to the exercise of the function under which the municipality is acting; and it held that a charter provision empowering a city to construct electric light works upon compliance with the formalities therein prescribed, did not, by implication, confer the power to borrow money and issue bonds for such purpose, the power conferred being, in the court's opinion, entirely consistent with the idea that the money should be raised by taxation, which is the usual method when any other is not pointed out by the statute. In arriving at this conclusion, however, the court also took into consideration the fact that when power

1 New York & Rosendale Cement Berlin Iron Bridge Co., 133 N. Y. Co. v. Davis, 173 N. Y. 235, aff'g 477. 62 App. Div. 577. See also Birge v.

2 Farr v. Grand Rapids, 112 Mich. 99.

to borrow and issue bonds was conferred by the charter for other purposes, the legislature had carefully limited the powers of the city council; and it declared that it naturally followed that power granted to incur indebtedness did not confer unlimited power to borrow money and issue negotiable evidences of debt therefor payable at any time in the future and at such rate of interest as the municipality might determine.

In Illinois, although the question does not appear to have directly arisen, yet the subject of the implied power of municipal corporations to borrow money for corporate purposes has been incidentally discussed in the decision of cases involving cognate questions. The Supreme Court of that State has said that municipal corporations are not usually endowed with the power to enter into traffic or general business, and are only created as auxiliaries to the government in carrying into effect some special governmental policy, or to aid in preserving the order and in promoting the well-being of the locality over which their authority extends. Being created for governmental purposes, the borrowing of money, in common with other similar powers, is not inherent or even a power usually conferred, and unless endowed with such power in their charter or by the legislature, they have no authority to borrow money.1

In Alabama, it has been declared that the doctrine is thoroughly settled in that State that the power to borrow money is not incident to municipal corporations, and that, if it exists in any instance, it must be by force of express legislative grant, or at least by force of legislative investment of power coupled with the imposition of duties which are incapable of exercise and performance without the borrowing of money. In Texas, the decisions also seem to be ad

Oquawka v. Graves, 82 Fed. Rep. 568; Chestnut Highway Com'rs v. Newell, 80 Ill. 587. See also Hardin County v. McFarlan, 82 Ill. 138; Law v. People, 87 Ill. 385, 394; Hewitt v. Normal School District, 94 Ill. 528; Coquard v. Oquawka, 192 Ill. 355. In Law v. People, 87 Ill. 385, 394, the court had under consideration questions arising under the constitutional limitation of power to incur debt, and in discussing the nature and extent of that power. It said: "The law is, and all persons are presumed to know it, that municipal bodies can only exercise such powers as are conferred upon them by their charters, and all persons dealing with them must see that the

verse to the existence of any implied power to borrow money, although the question before the court seems to have involved more particularly the existence of an implied power to issue negotiable bonds, a power which, as we shall see, is not identical with the power to borrow; and in Virginia, the court has used language which would seem to deny the power of a municipality to borrow money without express or plain statutory authority.

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In Iowa, it was held in one case that the directors of a school district had the power to borrow money to discharge a debt which has been legitimately created, and are authorized to pledge the credit of the district for that purpose, but it is to be observed that in this State the court is now definitely committed to the principle that a municipal corporation has no implied authority to issue negotiable bonds, or perhaps to borrow money. In connection with the subject of the implied power of a municipal corporation to borrow money, full consideration must be given to the decisions of the Supreme Court of the United States and of the courts of different States to the effect that even when authorized to incur debt, a municipal corporation has in general no implied power to issue negotiable securities therefor. The tendency of the recent decisions seems to be to limit the powers of municipal corporations, and to hold them rigidly to the exercise of those powers which are expressly or plainly conferred, and, at least in those jurisdictions where the implied power to issue negotiable instruments is denied, it is reasonable to assume that the courts will also deny the existence of any general or inherent implied power to borrow money; but, as before pointed out, the power to borrow money to meet ordinary corporate purposes is a different question from the power to incur debt in connection with an authorized purpose and to execute proper evidences of such indebtedness, although such evidences cannot, without express or clear authority from the legislature, be clothed with the qualities of negotiable paper under the law merchant.

§ 288 (124). When Power will be held to exist. The nature and extent of the power to borrow money and issue negotiable paper therefor was considered at length by the United States Circuit Court

1 See Robertson v. Breedlove, 61 Tex. 316; Waxahatchie v. Brown, 67 Tex. 519. See also Austin v. Nalle, 85 Tex. 520, 540, and Brenham v. German Am. Bank, 144 U. S. 173, on rehearing ib. 549, and s. c. more fully post, chapter on Municipal Bonds.

2 Richmond & W. P. Land Co. v. West Point, 94 Va. 668.

3 Austin v. Colony, 51 Iowa, 102.

Heins v. Lincoln, 102 Iowa, 69. See further, as to rule in Iowa, supra, § 283; post, chapter on Municipal Bonds.

for Missouri, in which, after a review of the decisions, English and American, the following conclusions were reached: Whether a municipal corporation possesses the power to borrow money, and to issue negotiable securities therefor, depends upon a true construction of its charter and the legislation of the State applicable to it. It has no incidental or inherent authority under the usual grants of municipal powers as a means of discharging its ordinary municipal functions. Such authority may be inferred from special and extraordinary powers, which require the expenditure of unusual sums of money, when it is usual to execute such powers by means of borrowing, and when, upon the whole legislation applicable to the municipality, such appears to have been the legislative intent.2 These principles were applied; and coupon bonds to borrow money to erect and repair wharves and to open streets, issued under the general grants of municipal power in the charter, were held not to be binding upon the city, while other bonds issued under a special act of the legislature, in payment of stock in companies organized to construct macadamized roads from the city, were held to be valid.3

§ 289 (125). Author's Views and Conclusions summed up. Whether there is power in a municipal corporation to borrow money or to issue negotiable paper or to do both depends, we think, upon the legislative intent, to be collected from statutes, general and special, applicable to the municipality or to the particular case in hand. The American cases are conflicting and cannot be harmonized.

The following summarizes our view of the sound and true doctrines on this subject:

1. The power to borrow money as a means of raising a fund to make future local improvements, or to carry on the ordinary opera

1 Gause v. Clarksville, 5 Dillon C. C. 165, 183. Thomas v. Port Hudson, 27 Mich. 320, declares the remedy to be for the money or property received. Post, $$ 289, 290, 321 and notes. The remedy where bonds of a city are issued without any power or authority and the money thereon is actually received by the city, is not an action on the bonds, but to recover the money. Gause v. Clarksville, supra. See also Robertson v. Breedlove, 61 Tex. 316; Merrill v. Monticello, 138 U. S. 673; Wood v. Louisiana, 5 Dillon C. C. 122; aff'd 102 U. S. 294; post, chapter on Municipal Bonds; infra, § 290, note. 2 Infra, § 321 and note;

chapter on Contracts.

and post,

3 The author who wrote the opinion of the court in Gause v. Clarksville, supra (Treat, J., dissenting), deems it proper to add that in view of the subsequent course of the decisions on this subject, he is led to doubt the soundness of one of the conclusions in that case; namely, that the authority to issue negotiable bonds for the macadamized roads could be legally deduced from the Act of 1857 quoted on p. 167 and from the circumstances mentioned on p. 181. Still it is difficult to see, as a practical matter, how the city could pay its subscriptions for the stock by the levy of the special limited tax from year to year, or otherwise than by the issue and sale of bonds.